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Agreed, I always build the strategy first, then look at position sizing on top of that.
The problem with backtesting position sizing is that if you have already developed a strategy that looks good with a single contract, you can't really pick a bunch of position sizing techniques, apply them each to that backtest, and see which would work the best.
Why not? Because applying position sizing to a strategy backtest you have already "approved" is HIGHLY misleading, since you already know the underlying backtest is good.
That is why in the Trader Challenge I did in the video I use real time (after development) data to vet position sizing approaches. Position sizing is really hard on strategies that do not work in real time.
Purely My Opinion:
To adequately test position sizing techniques, you need to take a couple hundred "approved" backtested strategies, and then run them live for a few years (3 to 5?) to see how the various position sizing approaches work on UNSEEN (after development) data.
Maybe one day I'll do that, but it is a huge project...
Can you help answer these questions from other members on NexusFi?
I am not sure I agree with that. A backtest is a backtest. What you are saying about position sizing testing is applicable to strategy testing in general. I don't see why you can't can run position sizing on in sample and out of sample data.
You can incorporate position sizing into the strategy at the start and optimize it as any other parameter.
That's it? Every communication I had with you regarding money management/position sizing ended up in a vague response on your part, similar to this. To me, personally, this comes across as arrogant. Or maybe you have a mental block as far as this topic is concerned. But then again, you don't owe me anything. My impression was this forum exists for sharing ideas and arguing about things.
Out of over two hundred videos on Youtube you have one that discusses position sizing. Very much in keeping with every other Youtube channel. This confirms my view that this area of trading is severely overlooked.
Another area that I have never seen coded is withdrawals from the trading account, though it changes a lot. If you summarily withdraw the amount equal or larger to the starting equity this completely negates the possibility of ruin. It also limits the number of contracts traded at any time, therefore reducing the risk. I have personal story to tell about it, though nobody seems terribly interested in the topic.
Some time ago I used to trade South African index futures (ALSI), and at some stage I had to draw a salary for my wife. 10k (South African Rand) every month, while my account fluctuated around 100k plus minus 20k. I withdrew 10k every month, most often when the account was up. It lasted for over a year, and the account never went below 70 - 75k.
By a simple math, my return was over 100% a year, without much drawdown. I think what happened was inadvertent anti-Martingale position sizing. By withdrawing equity after a streak of winning trades I automatically prevented increasing the number of contracts, and most of us know, winning streaks are often followed by a losing one. Also, after a year the risk of ruin was zero, as I took back all the money I put in the market in the first place.
Sorry for delay, I do not check in here much anymore.
Not sure what you are getting on about here, I don't recall any previous conversations with you (probably me forgetting). In any event, I apologize for obviously really upsetting you - which I assume is why you call me arrogant and say I have a mental block.
In any event, name calling and arguments are not somewhere I want to go.
I am interested in hearing your story