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OK - I like the concept, but would like to "see" it in action.......
I am sure there are other formulas that can be attempted as well....
It would be really interesting to see how different sizing techniques fit
best with different trading systems "types" : breakout, counterTrend,
trendfollow, scalper, etc.
...back to the keyboard....
> -----Original Message-----
> From: Bob Fulks [mailto:bfulks@xxxxxxxxxxxx]
> Sent: Monday, July 17, 2000 2:41 PM
> To: prosys@xxxxxxxxxxxxxxxx
> Cc: Jess O'Leary; omega-list@xxxxxxxxxx
> Subject: RE: Position sizing thoughts ...
>
>
> At 2:31 PM -0500 7/17/00, M. Simms wrote:
>
> >Bob - again, regarding....
> >
> >"You will find that with many systems the TradeRisk varies significantly
> >from trade to trade"
> >
> >1) How do you determine this (TradeRisk) ? A "Scoring system" (1->10) ???
> >
> >2) What is used to develop the scores ?
> >- stochastics ?
> >- % above/below moving average
> >- ?????
> >
> >3) How do you profile a trade position before getting into it ?
> >
> >Are you saying that TradeRisk varies but we cannot measure it APRIORI ?
>
>
> You can make a reasonable approximation. For example, consider the
> well known Keltner Channel system:
>
>
> ============================================
>
> Input: Length(89);
>
> Vars: Ave(Close),
> Upper(Close + 3 * AveTrueRange(Length)),
> Lower(Close - 3 * AveTrueRange(Length));
>
> Ave = Average(Close, Length);
> Upper = Ave + 3 * AveTrueRange(Length);
> Lower = Ave - 3 * AveTrueRange(Length);
>
> if MP < 1 and Close > Upper then Buy at market ;
> if MP = 1 and Close < Ave then ExitLong at market ;
> if MP >-1 and Close < Lower then Sell at market ;
> if MP =-1 and Close > Ave then ExitShort at market ;
>
> ============================================
>
> On the bar of entry the exit is sitting at "Ave" so you can calculate
> an approximate TradeRisk as follows for the long entry:
>
> if MP < 1 and Close > Upper then begin
> TradeRisk = (Close - Ave) * BigPointValue;
> AccountRisk = AccountSize * RiskPercent;
> if TradeRisk > 0 then Num = Floor(AccountRisk / TradeRisk);
> Buy Num contracts next bar at market;
> end;
>
> Now "Ave" will move as time progresses but a bad trade usually
> becomes apparent pretty quickly so "Ave" will probably not have moved
> too far by then.
>
> Bob Fulks
>
>
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