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Coding money management strategies.


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Coding money management strategies.

  #1 (permalink)
 
Small Dog's Avatar
 Small Dog 
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The Web is full of trading strategies. Almost every trading Youtube video is about a trading strategy. However, there is virtually no videos on money management. Sure, there is "don't bet more than n% on a single trade", but even then, I have NEVER seen some sort of support of the said "n" based on back testing.

Since there are quite a few algo traders, as well as those who back test their ideas, has anybody here done any testing of money management techniques. Optimal F, fixed fractional or fixed ratio?

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I nominate @kevinkdog.

This is right up his alley. He's done some great pieces where he runs millions of simulations to test Bull & Bear Regimes - with link, Exits - with link, Dollar vs A.T.R. Stops - with Link, Trailing vs Dollar Stops - with Link and An Alternative to Stops - with link. There's over 2 million backtests in those 5 articles. What's a million more?

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 kevinkdog   is a Vendor
 
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There is a good YouTube video on the subject, with results from about 30 experienced traders trying to beat a simple "1 contract traded always" position sizing method.

Self promotion rules prevent me from sharing it here though.

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 SMCJB 
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kevinkdog View Post
There is a good YouTube video on the subject, with results from about 30 experienced traders trying to beat a simple "1 contract traded always" position sizing method.

You mean this one? That's pretty good but 1 million sims would be better


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 Small Dog 
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Interesting video, very useful. One thing is missing: Fixed Ratio method. For some reason you seem to have an aversion to it. There is also the Reverse Martingale strategy, where you increase the size after a win and decrease after a loss.

Anyway, given wild difference in the outcome, I think every strategy code should include position sizing part.

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  #6 (permalink)
 
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 Small Dog 
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SMCJB View Post
I nominate @kevinkdog.

This is right up his alley. He's done some great pieces where he runs millions of simulations to test Bull & Bear Regimes - with link, Exits - with link, Dollar vs A.T.R. Stops - with Link, Trailing vs Dollar Stops - with Link and An Alternative to Stops - with link. There's over 2 million backtests in those 5 articles. What's a million more?

Thanks for the links. These are not money management or position sizing techniques though.

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 kevinkdog   is a Vendor
 
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Small Dog View Post
Interesting video, very useful. One thing is missing: Fixed Ratio method. For some reason you seem to have an aversion to it. There is also the Reverse Martingale strategy, where you increase the size after a win and decrease after a loss.

Anyway, given wild difference in the outcome, I think every strategy code should include position sizing part.

Fixed Ratio looks terrific in the book about it. What a lot of people don't realize is that the creator used Fixed Ratio to run up his account very high. But then he blew out his account using Fixed Ratio (source: personal conversation with his broker).

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 kevinkdog   is a Vendor
 
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Small Dog View Post
Thanks for the links. These are not money management techniques though.

Can you please explain exactly how you define "money management" as opposed to "position sizing?" I just want to be clear on what you are referring to.

Take fixed fractional sizing. Many consider that position sizing, since it tells you how many to trade. But it is also a money management approach, because you risk X% of your account on each trade.

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  #9 (permalink)
 
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 Small Dog 
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kevinkdog View Post
Can you please explain exactly how you define "money management" as opposed to "position sizing?" I just want to be clear on what you are referring to.

Take fixed fractional sizing. Many consider that position sizing, since it tells you how many to trade. But it is also a money management approach, because you risk X% of your account on each trade.


Small Dog View Post
Thanks for the links. These are not money management or position sizing techniques though.

Fixed.

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  #10 (permalink)
 
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 Small Dog 
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For the sake of terminology we can stick to the term "position sizing". How many contracts to buy/sell. What I was referring to in my comment is that stops and exits are part of a strategy. Position sizing comes on top of that.

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