Re: [amibroker] Re: PositionSize / Capital

[Al Venosa <advenosa@xxxxxxxxxxxx>]

danielwardadams wrote:

Just FYI, I got some pretty good results backtesting with the
following:

Capital        = -20 ; //20% of Equity.
RiskCapital    = .05*Capital ;
NumberOfShares = RiskCapital/(2.37*ATR(10)) ;
PositionSize   = Max(-20,NumberOfShares * BuyPrice [i]) ;

I think this achieves what we initially wanted (volatility based
sizing with diversification of at least 5 stocks). I think there is
some subtle difference between this and what Ed proposed for
PositionSize yesterday but I'm not sure what it is (?).

Dan:

This is a good idea. However, I tried testing it systematically relative to the simple 1% volatility model tonight, and I got the following results. First, using the simple code PositionSize = -1*C/Stoploss and using SetOption("MaxOpenPositions",15), I can get all equity used up in all trades whether or not I use 50% margin. Often, there would be as many as 12 or 13 trades open at one time. So, setting the maximum no. of open positions to a large number like 15 solves the inability to use all equity problem. You don't need Ed's Max part of the positionsize statement.  And, if you use 50% margin, you also use up all equity and your profit (and MDD) also go up substantially, as expected. Using the equal equity model (posqty = 5, positionsize = -100/posqty), I get higher CAR than the 1% model but also slightly higher MDD. Using margin, however, the CAR triples while the MDD increases by over 50%. Using your approach with no margin, I get comparable results as with my approach above. However, strangely, not all capital is used in each trade. Using margin, a lot of capital is left unfunded. Bottom line: it's difficult to beat the equal equity model. The % volatility model simply doesn't perform as well. Again, I ask could this be due to the fact that volatility doesn't have that much effect with short term systems?

Al Venosa


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