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Kelly criterion on Portfolio!
Started:August 5th, 2016 (06:59 AM) by Gabriel123 Views / Replies:97 / 0
Last Reply:August 5th, 2016 (06:59 AM) Attachments:0

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Kelly criterion on Portfolio!

Old August 5th, 2016, 06:59 AM   #1 (permalink)
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Futures Experience: Intermediate
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Kelly criterion on Portfolio!


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:

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

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  
TT <> 0 then 
= (NWT TT); 
ProfitFactor <> 0 then 
WTP - ((WTP)/(ProfitFactor));
Kelly = (KellyCriterion KellyPercent) * Equity
Margincapital <> 0 then 
Kelly /  Margincapital;
TradeSize MaxList(1Round(TradeSize,0));

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

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

TradeSize 0 then TradeSize 0

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