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I think that people use a fixed amount because of simplicity, not because of
any backtesting, simulation, etc.
Read some works by Ralph Vince ie. money management techniques. It's an eye
opener...
This should be tested like everything else.
Obviously, if the trading strategy is a loser, then 0% of equity should be
traded.
Drawdowns, or can you sleep at night, is also a factor, although Vince
points out max drawdown is a function of randomness.... (ie. if your system
trading is random)
Suggest you dig into this.... very deep subject and and have seen no one
volunteer any stats for a given system. I've done some research, but not near
enough..... but have been bit hard...
Money management can make or break you and it is system/security specific.
Kevin Campbell
In a message dated 2/27/2006 10:37:24 AM Central Standard Time,
no_reply@xxxxxxxxxxxxxxx writes:
Many people use 1~3% risks for their investment, but does anyone know
why? Does it have any approach to determine the risk level based on the
performance of any strategy?
Thank you in advance
Eric
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