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Re[4]: Bet sizing question: Scaling



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Hello Adrian,

My point was derived from your statement
a. Buy 1 contract on a dip and exit on a rally;
b. Buy 1 contract on a larger dip and exit on a rally;
c. Buy 1 contract in a BIG dip and exit on a rally;
If you end up holding 3 longs you never saw rally A or rally B so both
trades are in negative territory when buying C So A is a looser so you
invest more, B is a looser so you invest more, kind of like lose a
hand you double your bet and if you lose again you double you're bet
again. ( Yes even money roulette is what I was meaning )
You must have heard the saying "Cut your losses and let your profits
run" To do that maybe instead of buying B you should be selling A then
buy 3 at C.
If you can make money on C and also recover A and B's debt
you should make more by limiting A and B's debt on the way down.


AP> Hi Foolsgold,

AP> I'm not sure of your point here.  This wasn't presented as a trading model,
AP> but as part of the discussion of the existing thread.  I also said that our
AP> position sizing was adjusted to appropriate levels.  So talking of 50%
AP> drawdowns is irrelevant in the discussion.  Also, it is absolutely nothing
AP> like poker.  I assume your thinking of blackjack, baccarat, or red or black
AP> on roulette etc where you have some sort of even money chance.  Not sure of
AP> the relevance of that either.  By definition is we are trading a tested
AP> model it's because it has a positive expectancy.  The real point of the
AP> discussion is how is one model that accumulates up to 3 positions
AP> (considered as one trade) different from treating it as 3 separate but
AP> profitable models?  I think you must have misunderstood the whole point of
AP> discussion foolsgold.

AP> Cheers,
AP> Adrian

best regards
foolsgold