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Strategies & Market Trends : Systems, Strategies and Resources for Trading Futures -- Ignore unavailable to you. Want to Upgrade?

To: Tom Trader who wrote (12259)	1/9/1999 1:19:00 PM
From: Patrick Slevin	Respond to of 44573

Although that sort of problem was in my Industrial Engineering background I am real rusty with that. I'll print it out and give it some thought. I know one who teaches that at St. John's; I can't promise you he will even look at it but I'll copy it to an e-mail and send it over; it's worth a shot. Hell, maybe he can put it down as an Exam question and see what he gets.

To: Tom Trader who wrote (12259)	1/9/1999 5:34:00 PM
From: Stoctrash	Read Replies (2) \| Respond to of 44573

Tom, Excellet topic...Scott got me thinking about this type of thing not too long ago. I think you'd have to do it in steps,,,or leg into the position over a set period of time for it to work right, but I'm just guessing here. For instance, you don't know from time t=1 or 1 minute after your signal that this "is" the trade. So.... something like after X minutes (or hours) and the "TT signal" is still in effect, then buy Z more contracts IF the price is still above the (Buy Signal + L)... and move the stops to O. I think the same thing would be needed for your exit where you would LEG out of the position based on risk or reversal points from the most recent top. You might want to search the net for "game theory" or similar as I think this is relivant to that. Here are some I found: tau.ac.il see the next post August has is narrowed down!! Also, I would assume you would only want to add or max your position when you are ahead on the trade....and not average down? Correct? Does ANY of that make sense???.....!!!! I have some Stat & Fin. Mgmnt books at the office...I'll see if they have any examples or fromuli from which you might derive from. BTW...Pat, I think they should take option 2 & save the "people" who do pay their TAXES the cost of keeping them behind bars!!!

To: Tom Trader who wrote (12259)	1/9/1999 5:45:00 PM
From: August	Read Replies (2) \| Respond to of 44573

Tom, this is the Monte Carlo analysis. Have you played blackjack? What you stated is the concept behind winning in black jack. Increase your wager on higher probability hands (derived from counting cards). And wager only the base minimum wager on lower probability hands. In the case of black jack, one have to wager something on every hand as long as he want to sit at the table. In the case of the market, the minimum wager is zero. One does not have to wager at all on low probability situation. That's how I was able to beat the house on black jack (when I was a student). I played black jack in the casino only several times, but I was prepared before I went. In the case of black jack, the odds of winning is a little less than 50% on the average. If you win, you win 100% of the wager amount, likewise when you lose. In this situation, the base wager should be no more than 2% of your capital. Of course, you increase the wager above the base wager when the odds are better. Use the same approach to the market. Investing different amounts based on the risk/reward ratio as well as the absolute level of risk. As for your system, is a signal A signal, or there are signal and there ARE SIGNALS? If all your signals are indistinguishable, then there is little in the way of varying the number of contracts to achieve optimal results. If you can differentiate your different signals, and quantify the risk/reward levels, then you can simply back test different base wager and different ratio for increasing wagers over several years and look at the return vs. maximum drawdown to come up a amounts and ratios that you are comfortable with. There aren't that much to test. Err on the conservative side for preservation of capital, for then you will prevail in the end even under the most adverse conditions.

To: Tom Trader who wrote (12259)	1/9/1999 7:10:00 PM
From: Patrick Slevin	Read Replies (1) \| Respond to of 44573

Well I have my answer from my wiseacre relative of OJ, if you get my meaning, if you catch my drift. The message is as follows ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Happy New Year Pat- I think that the very short answer to this is that (1) yes, things like this can be mathematically modeled, although it takes stuff far more general than statistics to do it. (2) Some have made large sums of money doing such modeling, and some have lost even larger sums of money. The bottom line here is that the past never EXACTLY repeats itself, but even a perfect retrospective model would be a slave to the past. Finally, (3) the human decision-making capability inherent in any skilled trader would not be enhanced by arbitrary constraints, e.g., in this discussion, I will trade X contracts, no more and no less. I hope that gives at least one answer to your colleagues question. On the other hand, I work in a business school, and I can tell you first-hand that half the professors here have some sort of crack-pot scheme to make zillions; but, sadly, they are still earning college professor's salaries. Wish Pat and the big guys my regards, -xxxxxxxxx ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Just for reference my question to my friend was as follows..... --------- Hey xxxxxx, is this a feasible drill? You used to teach this, didn't you? I don't want to figure it out if it's a futile venture. Hey, if you still teach it then it may be a good Exam question. -------------- And then I posted an exact copy of your post. My friend is very good at this stuff. He was my professor in college. So whatever he said, that's my story as well and I'm sticking to it.

To: Tom Trader who wrote (12259)	1/10/1999 1:59:00 AM
From: Vitas	Read Replies (1) \| Respond to of 44573

Tom, you may find something on money management strategies here: intrepid.com The search engine for the Omega List is here: intrepid.com Vitas

To: Tom Trader who wrote (12259)	1/10/1999 6:31:00 PM
From: Chip McVickar	Read Replies (1) \| Respond to of 44573

Tom..... I believe the answer is fairly simple and straight forward. #1--Any single trade at any point is a 50/50 chance of winning - No Less -- No More #2--If you have developed a system that over 10 years produces 55% returns, then you have already determined it's rate of success. To determine exposure for any trade: #1--$50,000 ÷ $2,500 = 20 x 55% = 11 contracts or $27,500 at risk on any single trade #2--As the system produces gains your number of contracts will increase. If the next time you traded your holdings were now $125,000.... $125,000 ÷ $2,500 = 50 x 55% = 27.5 contracts. #3--Money management plays a part in retaining gains and a % of those returns need to be taken out of the account. If your system produced 70% returns: $50,000 ÷ $2,500 = 20 x 70% = 14 contracts Now...if your system can determine between good-bad-superb trades....then one could develope a method of fading the number of contracts for good-gad-superb signals. I don't believe it's much more difficult then this.... #1--If you wanted to be more careful use 45% $50,000 ÷ $2,500 = 20 x 45% = 9 contracts #2--Even more conservative....one would only trade the 5% that was over the 50% success rate in this case 20 x 5% = 1 But this would be hardly worth it. I'll look at this in a few days and see if I still agree >smile< Chip