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Finally, TS users recognize that too. Like to read the information you
provide and I was wondering how a trader would get portfolio value
information when backtesting?
Volker Knapp
(www.wealth-lab.com)
-----Ursprüngliche Nachricht-----
Von: David Colin [mailto:davidcolin@xxxxxxxxx]
Gesendet: Friday, August 20, 2004 6:47 AM
An: Omega-list@xxxxxxxxxx
Betreff: Why small account go broke fast
Here is a small illustration of why small accounts often go broke fast. If
you look at the attached gif, the red line at the bottom shows how many
Bond contracts (for example) you would trade if you were following the
"Original Turtles" position sizing formula, which is:
(.01 x Account Size) / (AvgTrueRange(20) * BigPointValue)
In this case I have set the account size to $30,000 -- small by some
standards, however many retail traders start with much less (ie $5000).
This formula assumes you are trading a portfolio and want to equalize the
risk across all markets traded -- ie you want the average daily dollar
fluctuation of all positions to be equal at roughly 1% of your account.
Note that, in this example, even with a $30,000 account size, the formula
would call for a "position" size of 1/3 to 9/10 of one T-bond contract. If
you run this on coffee, it will sometimes call for 1/10 of a contract,
similar with S&P.
Just food for thought.
David
PS. I am not saying this is the only bet sizing formula out there or
anything else people may accuse me of saying...just that this is one
example of a conservative formula used by some legendary traders we all know
of.
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