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Hi Foolsgold,
You may well be right in what you say, or maybe not, but as I tried to make
clear last time, it has absolutely nothing to do with the central discussion
of this thread.
Adrian
-----Original Message-----
From: foolsgold [mailto:foolsgold@xxxxxxxxxxxxx]
Sent: Monday, 30 July 2007 6:19 PM
To: Adrian Pitt
Cc: 'Alex Matulich'; omega-list@xxxxxxxxxx
Subject: Re[4]: Bet sizing question: Scaling
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
3:50 PM
3:50 PM
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