+ Reply to Thread
Page 1 of 4 1 4 LastLast
Results 1 to 10 of 33

Thread: Combo-MF Position Sizing

  1. #1
    Join Date
    Oct 2011
    Location
    Brugge-Belgium
    Posts
    394

    Combo-MF Position Sizing

    I have finished the third part of what seems to be a trilogy.
    It's all about "position sizing" or what others call "money management".
    To me trading without a proper position sizing technique is just like driving blindfolded in rush-hour with a very fast car that has no airbags nor safety-belts.

    PdP
    Attached Images

  2. #2

    Combo-MF v1

    PDP,

    Thank you for sharing your great work with the forum.

    Can you send again please the v1 ?

    Yakov.

  3. #3
    Join Date
    Oct 2011
    Location
    Brugge-Belgium
    Posts
    394
    Yakov,

    here it is:
    Attached Images

  4. #4
    Join Date
    Oct 2011
    Location
    Brugge-Belgium
    Posts
    394
    I have received a private message for Trev that I will answer publicly.

    Quote Originally Posted by manucastle
    Thank you tremendously for your hard work on the Combo_MF.

    A couple of (very naive) questions please on your table.

    You show a Kelly score of 11.94

    You show a NoFear score of 0.1005

    You show risk% factors of 0.35%,0.44%,0.29% and 0.48%

    How do these relate practically to the amount invested currently in TQQQ and SMN ?

    The Risk% figures of 0.35%, 0.44%, 0.29% and 0.48% Do these mean 35%, 44%, 29% and 48% of total equity to invest ?

    Sorry to be so thick but it is best sometimes to appear stupid if something is not understood.

    Thanks in advance.

    Trev
    If the Risk% says 0.35% for Combo-MF, I will take a maximum risk for trading TQQQ of 0.35% of the at that time available equity.

    Example:
    Let's assume that the equity is $ 10,000.00. The maximum risk for a trade in TQQQ should be $ 10,000.00 x 0.35% = $ 35.00. The number of shares to buy must be calculated with the ATR3 of TQQQ at that moment. Let's assume the ATR3 for TQQQ is 2.1963. The ideal ATR multiplier that I have found through back tests for a long trade in TQQQ is 1.2. The possible number of shares of TQQQ to be bought is
    Risk / ATR3 x ATR multiplier
    or $ 35.00 / 2.1963 x 1.2 = 13 shares
    This seems like a very small position size. Because the risk to be taken is limited by my strategy is now low, than it makes sense to take very small positions for now. The risk is so low because my strategy has detected that the different models do not perform good for the moment. If Kelly is low then the overall performance of the models as a whole is not good. If NoFear is low then the strategy has detected that there where significant recent draw downs. Both are true for the moment, unfortunately.

    PdP

  5. #5
    Quote Originally Posted by pdp-brugge View Post
    I have received a private message for Trev that I will answer publicly.



    If the Risk% says 0.35% for Combo-MF, I will take a maximum risk for trading TQQQ of 0.35% of the at that time available equity.

    Example:
    Let's assume that the equity is $ 10,000.00. The maximum risk for a trade in TQQQ should be $ 10,000.00 x 0.35% = $ 35.00. The number of shares to buy must be calculated with the ATR3 of TQQQ at that moment. Let's assume the ATR3 for TQQQ is 2.1963. The ideal ATR multiplier that I have found through back tests for a long trade in TQQQ is 1.2. The possible number of shares of TQQQ to be bought is
    Risk / ATR3 x ATR multiplier
    or $ 35.00 / 2.1963 x 1.2 = 13 shares
    This seems like a very small position size. Because the risk to be taken is limited by my strategy is now low, than it makes sense to take very small positions for now. The risk is so low because my strategy has detected that the different models do not perform good for the moment. If Kelly is low then the overall performance of the models as a whole is not good. If NoFear is low then the strategy has detected that there where significant recent draw downs. Both are true for the moment, unfortunately.

    PdP
    Thanks very much for your quick reply.

    If it is not to much work, would it be possible to include the current ATR3 and the ATR multipliers in your table ?

    Thanks in advance.

    Trev

  6. #6
    Quote Originally Posted by pdp-brugge View Post
    I have received a private message for Trev that I will answer publicly.



    If the Risk% says 0.35% for Combo-MF, I will take a maximum risk for trading TQQQ of 0.35% of the at that time available equity.

    Example:
    Let's assume that the equity is $ 10,000.00. The maximum risk for a trade in TQQQ should be $ 10,000.00 x 0.35% = $ 35.00. The number of shares to buy must be calculated with the ATR3 of TQQQ at that moment. Let's assume the ATR3 for TQQQ is 2.1963. The ideal ATR multiplier that I have found through back tests for a long trade in TQQQ is 1.2. The possible number of shares of TQQQ to be bought is
    Risk / ATR3 x ATR multiplier
    or $ 35.00 / 2.1963 x 1.2 = 13 shares
    This seems like a very small position size. Because the risk to be taken is limited by my strategy is now low, than it makes sense to take very small positions for now. The risk is so low because my strategy has detected that the different models do not perform good for the moment. If Kelly is low then the overall performance of the models as a whole is not good. If NoFear is low then the strategy has detected that there where significant recent draw downs. Both are true for the moment, unfortunately.

    PdP
    PdP,

    $35.00/2.1963 X 1.2 = 19 shares (not 13 shares) Is this correct ?


    Trev

  7. #7
    Join Date
    Oct 2011
    Location
    Brugge-Belgium
    Posts
    394
    No, sorry - my fault - I should have placed parentheses.

    The formula to calculate the number of shares to buy/sell is
    Number of Shares = (Equity * Risk%) / ( ATR3 * ATR multiplier)
    in my example, this will be
    ( $ 10,000.00 * 0.35% ) / ( 2.1963 * 1.2 ) = 13.27991
    The result of this calculation is rounded downwards.
    The stop-loss is placed at entry-price - ( ATR3 * ATR multiplier).
    Let's assume that the entry price is $ 48.3930 then the initial stop-loss should be placed at 45.7574.
    If the trade completely goes wrong and the stop-loss is hit, the loss shall be 13 * ( 48.3930 - 45.7574) = $ 34.2628

    PdP

  8. #8
    Join Date
    Oct 2011
    Location
    Brugge-Belgium
    Posts
    394
    Trev,

    this is the expanded table
    the ATR3 and ATR Multiples are added for the models where trades can be made

    PdP
    Attached Images  

  9. #9
    Quote Originally Posted by pdp-brugge View Post
    Trev,

    this is the expanded table
    the ATR3 and ATR Multiples are added for the models where trades can be made

    PdP
    Hi PdP,

    That's excellent. Thank you very much indeed for your hard work. :O)

    Trev

  10. #10

    UXI/SIJ

    pdp,

    thanks so much for sharing your work. this is very interesting, but i am surprised that you chose XLI as one of your 4 studies and UXI/SIJ as the trading vehicles within. the volume is so low on both of those ETFs that i wonder is it realistic to trade them? was there another runner up that had better volume in your tests, or were the results for the other candidates too poor?

    i know you spent a tremendous amount of time on your studies, so thanks again for sharing it with the group,
    lisa

+ Reply to Thread

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts