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Risk of Ruin


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Risk of Ruin

  #141 (permalink)
 kevinkdog   is a Vendor
 
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ridingthewav View Post
Would there be a practical application of this approach for position sizing to trading stocks, not futures?

For example, modifying the Risk Adjusted Optimal F spreadsheet to incorporate an Entry, Stop Loss, Take Profit Price on a single trade, where the calculation of those represents the Average Win/Average Loss (per share)?

Also, I'm a bit confused as to the commission "Points" how does this translate into dollar value per trade? Is it representative of a percentage of the trade eg 1pt = 1%? And same question as to slippage, does points represent percentage?

I am not sure who developed that tool, but they would be the person to ask. I did not develop it.

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  #142 (permalink)
 Freedom303 
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Thanks a lot for interesting discussions and work on excel..please see below an interesting paper on experiment in this direction.. enjoy reading🙂

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  #143 (permalink)
 
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 SMCJB 
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Freedom303 View Post
please see below an interesting paper on experiment in this direction.. enjoy reading🙂

WOW. Amazed that finance students/professionals would perform that badly. Love the conclusions.

Probably good reading for most traders. Unfortunately trade sizing is really a function of probability/statistics, which is often something many are not good at.

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  #144 (permalink)
 Freedom303 
Stuttgart, BW, Germany
 
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Yes i find it more interesting that.. sometimes we trade just out of boredom..our brain seeks action and dopamine.. excitement of being right and anger of being wrong.. both🙂, so i am doing since months an experiment .. take crazy and wild trades on TV and more measured moves on NT Sim in parallel..its working so far but interesting would be when i will switch to NT Live🙂 lets see ..however excel here in the thread was an eyeopener .. u can only bet x% for saying long in game.. its about staying long .. focusing on process, results will be a side effect..( easier said than done lol)
What an opportunity trading presents to us to look inside our mind.. all spaces .. glad to have it🙂

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  #145 (permalink)
 
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 Small Dog 
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Freedom303 View Post
Thanks a lot for interesting discussions and work on excel..please see below an interesting paper on experiment in this direction.. enjoy reading🙂

This is a nice illustration of the importance of money management. In Ryan Jones' The Trading Game there is a similar experiment with coin flip and 1:2 risk-reward. Heads - you lose $1, tails - win $2. Depending on the percentage of capital you risk on each flip the end result is vastly different. I ran similar simulation in Excel and got the same results.

In the movie Rounders Matt Damon's character makes a point. Poker, in essence, is the game of chance. However, every year it is the same ten guys sitting around the table at the world tournament final. I think trading is similar. Everyone of us is dealt the same cards, yet only a few make it, and even fewer make it big. Food for thought.

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  #146 (permalink)
 kevinkdog   is a Vendor
 
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Small Dog View Post
This is a nice illustration of the importance of money management. In Ryan Jones' The Trading Game there is a similar experiment with coin flip and 1:2 risk-reward. Heads - you lose $1, tails - win $2. Depending on the percentage of capital you risk on each flip the end result is vastly different. I ran similar simulation in Excel and got the same results.

In the movie Rounders Matt Damon's character makes a point. Poker, in essence, is the game of chance. However, every year it is the same ten guys sitting around the table at the world tournament final. I think trading is similar. Everyone of us is dealt the same cards, yet only a few make it, and even fewer make it big. Food for thought.

Too bad Ryan did not follow his own own advice - according to his broker.

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  #147 (permalink)
 
Small Dog's Avatar
 Small Dog 
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That the dominant story, isn't it? Not that he was playing a coin throwing game with his broker. Breaking the rules that were tested brings less than optimal results. I've done it myself a couple of times.

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  #148 (permalink)
 
Small Dog's Avatar
 Small Dog 
Sydney NSW Australia
 
Experience: Intermediate
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Trading: Forex, index futures
Frequency: Daily
Duration: Days
Posts: 161 since Jun 2020
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ridingthewav View Post
Would there be a practical application of this approach for position sizing to trading stocks, not futures?

For example, modifying the Risk Adjusted Optimal F spreadsheet to incorporate an Entry, Stop Loss, Take Profit Price on a single trade, where the calculation of those represents the Average Win/Average Loss (per share)?

Also, I'm a bit confused as to the commission "Points" how does this translate into dollar value per trade? Is it representative of a percentage of the trade eg 1pt = 1%? And same question as to slippage, does points represent percentage?

I think position sizing is most relevant (crucial) for leveraged instruments. I am not sure if it makes any difference If you're buying stocks at nominal value.

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