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Kelly criterion on Portfolio!
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Kelly criterion on Portfolio!

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Elite Member
Stockholm
 
Futures Experience: Intermediate
Platform: ProRealTime
Favorite Futures: DAX
 
Posts: 39 since Jul 2015
Thanks: 6 given, 3 received

Kelly criterion on Portfolio!

Hi!

I have the code below for Kelly criterion position sizing. However I want to use Kelly criterion for a portfolio, not for a single instrument. When using this code on the instruments in a portfolio the Kelly criterion sizing is counted for, for every instrument separately.

Meaning, if the latest trades on AAPL har been doing great, the position size on that might be 10000 stocks, while the portfolios next trade in, let's say, MCD only takes 500 stocks since the latest trades in that instrument have been loosers.

How do I change this code to make it treat the whole portfolio as a instrument - meaning that it takes bigger position size after winning trades regardless of which instruments they were made on?

Is it necessary to add a money management code?

This is my code:

 
Code
                            
InputsInitialCapital100000 ), Margincapital5000 ), KellyPercent.45 {Half-Kelly}); 
  
Vars:   TradeSize), Equity), GL), GP), NWT), TT), 
        
ProfitFactor), WTP), KellyCriterion), Kelly);

var: 
ATR(0);
ATR AvgTrueRange(10);

Equity    Round((InitialCapital NetProfit OpenPositionProfit),0);//Equity

//Kelly Criterion Variables
GL        Average(Absvalue(Grossloss),30);     
GP        Average(Grossprofit,30);
NWT     Numwintrades;
TT      Totaltrades;
 
//Kelly Criterion Calculation
If GL <> 0 then  
ProfitFactor   
GP/GL;
If 
TT <> 0 then 
WTP 
= (NWT TT); 
If 
ProfitFactor <> 0 then 
KellyCriterion 
WTP - ((WTP)/(ProfitFactor));
Kelly = (KellyCriterion KellyPercent) * Equity
If 
Margincapital <> 0 then 
TradeSize 
Kelly /  Margincapital;
TradeSize MaxList(1Round(TradeSize,0));

//RSI Strategy - Buy
If Marketposition 0 then 
begin
    
    
If RSI(c,2) < and Average(C,200then 
    
    begin
            
    buy 
(TradeSize*50000/Cshares next bar at L limit;    
    
Value1 TradeSize*50000/C;
    
    
end
     
end;   

//RSI Strategy - Sell 
If Marketposition 1 then 
begin
    
    
If RSI(c,2) > 70 then
    
    begin
    
    sell value1 shares next bar at market
;
    
Value1 0;    

    
end;
    
end;
    
if 
TradeSize 0 then TradeSize 0

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