Triathlete
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I agree craft.
Position sizing though is one reason why some traders blow their accounts way sooner then they need to.
I agree craft.
Position sizing though is one reason why some traders blow their accounts way sooner then they need to.
Triathlete
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And therefore are not in the game long enough to gain the experience to become profitable.
A person who has a profitable strategy can throw it all away and turn it into a losing strategy with incorrect position sizing.
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This is a good little excerpt for meditation. It's not poetic fantasy. He's speaking literally and not a single word is wasted or used incorrectly. A "Jnani" refers to someone who has complete control over the depths of his mind.
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"Please remember, objects are really the perceiving of them. Conversely, therefore, the
perceiving of them is what the objects are. Try to understand.
When an object is seen as an object, there would have to be a subject other than the object. As
the Jnani perceives, there is neither the subject that sees nor the object that is seen; only the 'seeing'.
In other words, the Jnani's perception is prior to any interpretation by the sensory faculties. Even if
the normal process of objectification has taken place, the Jnani, in his perspective, has taken note of
this fact and seen the false as false. The Jnani in his undivided vision, has perceived that physically
both the seer and the seen are objects, and that the functioning of consciousness itself merely produces effects in consciousness. Both the producing and the perceiving are done by
consciousness, in consciousness". ~MN
------------------------------------------------------------------------------------------
"Please remember, objects are really the perceiving of them. Conversely, therefore, the
perceiving of them is what the objects are. Try to understand.
When an object is seen as an object, there would have to be a subject other than the object. As
the Jnani perceives, there is neither the subject that sees nor the object that is seen; only the 'seeing'.
In other words, the Jnani's perception is prior to any interpretation by the sensory faculties. Even if
the normal process of objectification has taken place, the Jnani, in his perspective, has taken note of
this fact and seen the false as false. The Jnani in his undivided vision, has perceived that physically
both the seer and the seen are objects, and that the functioning of consciousness itself merely produces effects in consciousness. Both the producing and the perceiving are done by
consciousness, in consciousness". ~MN
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I am betting many many people ignore this.
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Good points.
I've noticed however that if you have a fairly high win rate, say 70%, that position sizing based on serial correlation is not that useful, even detrimental. Do you agree?
Or Howard, if you're reading.../?
No
Win rate in isolation tells you Sweet FA about how you should position size - Its just one small part of a much bigger picture.
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So is that as the market falls, position size decreases? or turns on the defensive all together and don't take positions in a falling market?
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Not so much the market, but your running equity. You can use it both ways - increase or decrease position size.
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I get the feeling you're not going to say what that is, ie. the elements of the bigger picture of position sizing.
Thought I did
Not that I understand you at the best of times but it appears to me that in two consecutive posts you have stated that serial correlation doesn’t matter and next post that you should adjust your position sizing based on outcome – if you are doing that you are either inferring serial correlation does matter or saying the longer your random run gets the more you should bet?????
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Yeh I guess I was doing that to some degree.
[edit] just found some old excel files. Will post.
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These are old files. I think I gave up at the time because I didn't have the sort of available cash to implement successfully. But yeh, they're impressive.
Two curves, the first is fixed position sizing, the second is based on the previous trade outcome. Quite a difference.
Two curves, the first is fixed position sizing, the second is based on the previous trade outcome. Quite a difference.
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I was thinking that this thread was going way off topic, but perhaps it's showing how our ego can prevent us thinking clearly about any aspect that doesn't fit with our view of how things work.
Win % is such a minor statistic of our trading results, but as it's attached to our "ego's" need to be right, it gets lots of attention. Win% is the tag that all trading spruikers use to get our attention. It's our egos that demand a W% > 50%. We'll sell too early just to get a winning trade and boost our W%.
If you see anyone focusing on W% then, they just don't get it.
Win % is such a minor statistic of our trading results, but as it's attached to our "ego's" need to be right, it gets lots of attention. Win% is the tag that all trading spruikers use to get our attention. It's our egos that demand a W% > 50%. We'll sell too early just to get a winning trade and boost our W%.
If you see anyone focusing on W% then, they just don't get it.
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This is a bit more realistic, since it's a big cap system over a smaller number of trades. Volaitility of returns looks roughly the same, but end profit 45% greater.
Max number of consecutive losers becomes an important stat, directly linked to win rate. The importance is obvious in terms of risk of ruin.
Max number of consecutive losers becomes an important stat, directly linked to win rate. The importance is obvious in terms of risk of ruin.
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I will refrain from questioning peoples thought process but Win % is a huge part of having a smooth sustainable curve , any one who think differently just does'nt get it ( sound familiar
)Win % has a huge factor in max Drawdown , without getting into it i will just lean on these 2 visuals . Those that believe W% isnt important are naive and need to rethink that belief , Natually R is the otherside of positive expectancy and is just as important and needs to be optomized just as much as W
Probability curves will show the realities of positive expectancy and the pitfalls
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I will refrain from questioning peoples thought process but Win % is a huge part of having a smooth sustainable curve , any one who think differently just does'nt get it ( sound familiar
Win % has a huge factor in max Drawdown , without getting into it i will just lean on these 2 visuals . Those that believe W% isnt important are naive and need to rethink that belief , Natually R is the otherside of positive expectancy and is just as important and needs to be optomized just as much as W
Probability curves will show the realities of positive expectancy and the pitfalls
View attachment 66980
View attachment 66981
+1
Everyone needs to understand Risk of Ruin!
Triathlete
Keep it Simple..!
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EXACTLY:....xyxthumbs
I will refrain from questioning peoples thought process but Win % is a huge part of having a smooth sustainable curve , any one who think differently just does'nt get it ( sound familiar
Win % has a huge factor in max Drawdown , without getting into it i will just lean on these 2 visuals . Those that believe W% isnt important are naive and need to rethink that belief , Natually R is the otherside of positive expectancy and is just as important and needs to be optomized just as much as W
Probability curves will show the realities of positive expectancy and the pitfalls
View attachment 66980
View attachment 66981
Maybe you have missed what is being said here. Which is simply that there is much more to position sizing than Win%.
Win% is an average. It's not the average that is important, it's the order of how this win/loss may unfold in conjunction with the distribution of win/lose amount that should dictate position sizing. The calculation of a potential losing streak based solely on average winning % using maths that has an assumption (whether the person realised or not) of randomness is a long way from useful information for position sizing but hey its probably better than most use.
I still contend that most people's Ego's are way too big when it comes to position sizing.
So explain it to me.
In another thread today you said you are using 15% stop loss and 5 positions and you have previously said about your low tolerance for draw downs.
Triathlete
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What is their to explain??? Enough has been said in the previous posts....
Here is a definition....
DEFINITION of 'Risk Of Ruin'
The probability of an individual losing sufficient trading or gambling money (known as capital base) to the point at which continuing on is no longer considered an option to recover losses.
Risk of ruin is calculated by taking into account the probability of winning (or making money on a trade), the probability of incurring losses, and the portion of an individual's capital base that is in play or at risk. Also known as the "probability of ruin"
BREAKING DOWN 'Risk Of Ruin'
Risk of ruin need not result in bankruptcy (although it often does), but rather the point at which continuing on would be unwise. It signifies a risk more relevant in trading and gambling, where there is a high probability of losing an entire bet or trade.
The risk becomes even greater for individuals who trade large percentages of their accounts. For example, say an investor has $3,000 and purchases $3,000 worth of call options. If there is a 40% chance that the options will not be exercised, then the risk of ruin is 40%.
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