Vant Tharp's Percent Volatility Position Sizing - FX equation - PLEASE ANYONE? - Psychology and Money Management | futures io social day trading
futures io futures trading


Vant Tharp's Percent Volatility Position Sizing - FX equation - PLEASE ANYONE?
Updated: Views / Replies:3,114 / 5
Created: by fxhst329 Attachments:0

Welcome to futures io.

(If you already have an account, login at the top of the page)

futures io is the largest futures trading community on the planet, with over 90,000 members. At futures io, our goal has always been and always will be to create a friendly, positive, forward-thinking community where members can openly share and discuss everything the world of trading has to offer. The community is one of the friendliest you will find on any subject, with members going out of their way to help others. Some of the primary differences between futures io and other trading sites revolve around the standards of our community. Those standards include a code of conduct for our members, as well as extremely high standards that govern which partners we do business with, and which products or services we recommend to our members.

At futures io, our focus is on quality education. No hype, gimmicks, or secret sauce. The truth is: trading is hard. To succeed, you need to surround yourself with the right support system, educational content, and trading mentors Ė all of which you can find on futures io, utilizing our social trading environment.

With futures io, you can find honest trading reviews on brokers, trading rooms, indicator packages, trading strategies, and much more. Our trading review process is highly moderated to ensure that only genuine users are allowed, so you donít need to worry about fake reviews.

We are fundamentally different than most other trading sites:
  • We are here to help. Just let us know what you need.
  • We work extremely hard to keep things positive in our community.
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts.
  • We firmly believe in and encourage sharing. The holy grail is within you, we can help you find it.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

Reply
 
Thread Tools Search this Thread
 

Vant Tharp's Percent Volatility Position Sizing - FX equation - PLEASE ANYONE?

  #1 (permalink)
Trading Apprentice
Bratislava, Slovakia
 
Futures Experience: Advanced
Platform: NT, MC, TS, MT
Favorite Futures: Oil
 
Posts: 8 since Aug 2011
Thanks: 0 given, 5 received

Vant Tharp's Percent Volatility Position Sizing - FX equation - PLEASE ANYONE?

Hello,

we are creating the script where we would like to use Percent Volatility Position Sizing Method described in Van Tharp's book Trade Your Way to Financial Freedom. I was wondering if anyone could help us out.

"MODEL 4: THE PERCENT VOLATILITY MODEL
Volatility refers to the amount of daily price movement of the
underlying instrument over an arbitrary period of time. Itís a direct
measurement of the price change that you are likely to be exposed
to-for or against you-in any given position. If you equate the
volatility of each position that you take, by making it a fixed percentage
of your equity, then you are basically equalizing the possible
market fluctuations of each portfolio element to which you are
exposing yourself in the immediate future.
Volatility, in most cases, simply is the difference between the
high and the low of the day. If IBM varies between 141 and 143%
then its volatility is 2.5 points, However, using an average true
range takes into account any gap openings. Thus, if IBM closed at
139 yesterday, but varied between 141 and 143% today, youíd need
to add in the 2 points in the gap opening to determine the true
range. Thus, todayís true ranges is between 139 and 143í&or 4%
points. This is basically Wells Wilderís average true range calculation
as shown in the definitions~at the end of the book.
Hereís how a percent volatility calculation might~work for
position sizing. Suppose that you have $50,000 in your account and
you want to buy gold. Letís say that gold is at $400 per ounce and
during the last 10 days the daily range is $3. We will use a IO-day
simple moving average of the average true range as our measure of
volatility. How many gold contracts can we buy?
Since the daily range is $3 and a point is worth $100 (i.e., the
contract is for 100 ounces), that gives the daily volatility a value of
$300 per gold contract. Letís say that we are going to allow volatility
to be a maximum of 2 percent of our equity. Two percent of
$50,000 is $1,000. If we divide our $300 per contract fluctuation into
our allowable limit of $1,000, we get 3.3 contracts. Thus, our position-
sizing model, based on volatility, would allow us to purchase
3 contracts
."

We are trading forex and this formula applies to the futures markets. I've been trading for several years, it's actually first time I've came accross this method. Could someone help us clarify the correct formula for the forex market based on the text above?

The problem is that there are many softwares, sites interpreting the above differently. It's based on the above text altought there are many versions I've found and I'm just not sure which one would be the most accurate based on the text above.

Wealth Lab - Percent Volatility - Wealth-Lab Wiki
TradeStation - Strategy Impact: Trade-Size Formulas | Analysis Concepts | TradeStation Labs
http://www.tradestation.com/education/labs/analysis-concepts/~/media/Images/Trad...20Formulas/image-16.ashx
AdapTrade - http://www.adaptrade.com/MSA/MSA3UsersGuide.pdf

So we have several formulas..

Percent Volatility Position Size = (y % of Equity x 0.01) x Account Equity / (point value * ATR Points)
Share Amount = (TS*EQ)/TR; Position Size = Equity X Risk% / ATR

Which one would be the best for the forex market? Or how would above text be rewritten f.e. instead of using IBM and Gold... to EURUSD? What would be the formula for the forex market?

I'm looking for the clearest formula that would best represent above text and fit to the forex market.

I'm truly ashamed by myself, I'm just unable to convert original Van Tharp's text to FX formula extracting it just from the text above. Can someone help me with this?

Reply With Quote
The following user says Thank You to fxhst329 for this post:
 
  #2 (permalink)
Quick Summary
Quick Summary Post

Quick Summary is created and edited by users like you... Add FAQ's, Links and other Relevant Information by clicking the edit button in the lower right hand corner of this message.

 
  #3 (permalink)
Identify Evaluate Execute
Mercer Island WA
 
Futures Experience: Advanced
Platform: Ninjatrader/Strategy Desk
Broker/Data: Various
Favorite Futures: TF/NQ/ES/Stocks
 
djkiwi's Avatar
 
Posts: 561 since May 2010
Thanks: 980 given, 1,524 received



fxhst329 View Post
Hello,

we are creating the script where we would like to use Percent Volatility Position Sizing Method described in Van Tharp's book Trade Your Way to Financial Freedom. I was wondering if anyone could help us out.

"MODEL 4: THE PERCENT VOLATILITY MODEL
Volatility refers to the amount of daily price movement of the
underlying instrument over an arbitrary period of time. Itís a direct
measurement of the price change that you are likely to be exposed
to-for or against you-in any given position. If you equate the
volatility of each position that you take, by making it a fixed percentage
of your equity, then you are basically equalizing the possible
market fluctuations of each portfolio element to which you are
exposing yourself in the immediate future.
Volatility, in most cases, simply is the difference between the
high and the low of the day. If IBM varies between 141 and 143%
then its volatility is 2.5 points, However, using an average true
range takes into account any gap openings. Thus, if IBM closed at
139 yesterday, but varied between 141 and 143% today, youíd need
to add in the 2 points in the gap opening to determine the true
range. Thus, todayís true ranges is between 139 and 143í&or 4%
points. This is basically Wells Wilderís average true range calculation
as shown in the definitions~at the end of the book.
Hereís how a percent volatility calculation might~work for
position sizing. Suppose that you have $50,000 in your account and
you want to buy gold. Letís say that gold is at $400 per ounce and
during the last 10 days the daily range is $3. We will use a IO-day
simple moving average of the average true range as our measure of
volatility. How many gold contracts can we buy?
Since the daily range is $3 and a point is worth $100 (i.e., the
contract is for 100 ounces), that gives the daily volatility a value of
$300 per gold contract. Letís say that we are going to allow volatility
to be a maximum of 2 percent of our equity. Two percent of
$50,000 is $1,000. If we divide our $300 per contract fluctuation into
our allowable limit of $1,000, we get 3.3 contracts. Thus, our position-
sizing model, based on volatility, would allow us to purchase
3 contracts
."

We are trading forex and this formula applies to the futures markets. I've been trading for several years, it's actually first time I've came accross this method. Could someone help us clarify the correct formula for the forex market based on the text above?

The problem is that there are many softwares, sites interpreting the above differently. It's based on the above text altought there are many versions I've found and I'm just not sure which one would be the most accurate based on the text above.

Wealth Lab - Percent Volatility - Wealth-Lab Wiki
TradeStation - Strategy Impact: Trade-Size Formulas | Analysis Concepts | TradeStation Labs
http://www.tradestation.com/education/labs/analysis-concepts/~/media/Images/Trad...20Formulas/image-16.ashx
AdapTrade - http://www.adaptrade.com/MSA/MSA3UsersGuide.pdf

So we have several formulas..

Percent Volatility Position Size = (y % of Equity x 0.01) x Account Equity / (point value * ATR Points)
Share Amount = (TS*EQ)/TR; Position Size = Equity X Risk% / ATR

Which one would be the best for the forex market? Or how would above text be rewritten f.e. instead of using IBM and Gold... to EURUSD? What would be the formula for the forex market?

I'm looking for the clearest formula that would best represent above text and fit to the forex market.

I'm truly ashamed by myself, I'm just unable to convert original Van Tharp's text to FX formula extracting it just from the text above. Can someone help me with this?

Hi, did you look at this thread? MXAS has a spreadsheet with the forumlas. For forex I would have thought you just change the point value.

https://futures.io/psychology-money-management/357-position-sizing-van-tharp.html

Cheers
DJ

Reply With Quote
The following 2 users say Thank You to djkiwi for this post:
 
  #4 (permalink)
Trading Apprentice
Bratislava, Slovakia
 
Futures Experience: Advanced
Platform: NT, MC, TS, MT
Favorite Futures: Oil
 
Posts: 8 since Aug 2011
Thanks: 0 given, 5 received

I did, but it's the code for NT

I've been suggested all the formulas are the same and FX point value should be 1 so AdapTrade comes to Tradestation formula or generally interpreted formula?

Anyone follows can anyone explain?

Reply With Quote
The following user says Thank You to fxhst329 for this post:
 
  #5 (permalink)
Trading Apprentice
Bratislava, Slovakia
 
Futures Experience: Advanced
Platform: NT, MC, TS, MT
Favorite Futures: Oil
 
Posts: 8 since Aug 2011
Thanks: 0 given, 5 received

the spreadsheet doesn't cover forex also, I've seen it before...

Reply With Quote
The following user says Thank You to fxhst329 for this post:
 
  #6 (permalink)
 Vendor: www.traderrach.com 
Auckland, New Zealand
 
Futures Experience: Master
Platform: MetaTrader
Broker/Data: Pepperstone
Favorite Futures: Forex
 
TraderRach's Avatar
 
Posts: 21 since Oct 2012
Thanks: 8 given, 26 received

Position Sizing for Forex

Hi

% volatility position size (number of contracts) = y% * (Account Equity)[= Amount risked per trade] / (Value per contract) / (ATR pips)

Value per contract = on a pair where you earn USD (you are earning in the second quoted pair e.g. USD in EURUSD) and your account is in USD, the value is 10.0. It will vary greatly if the second quoted pair is GBP (e.g. EURGBP) or JPY (e.g. AUDJPY). You always need to work this out using the exchange rate of your account base currency vs the second quoted pair in the forex pair traded.

ATR pips = the distance in the price * 10,000 for non-JPY pairs, and the distance in price * 100 for JPY pairs

I hope this helps.

Cheers Rach

Reply With Quote
The following 2 users say Thank You to TraderRach for this post:

Reply



futures io > > > Vant Tharp's Percent Volatility Position Sizing - FX equation - PLEASE ANYONE?

Thread Tools Search this Thread
Search this Thread:

Advanced Search



Upcoming Webinars and Events (4:30PM ET unless noted)

Jigsaw Trading: TBA

Elite only

FuturesTrader71: TBA

Elite only

NinjaTrader: TBA

Jan 18

RandBots: TBA

Jan 23

GFF Brokers & CME Group: Futures & Bitcoin

Elite only

Adam Grimes: TBA

Elite only

Ran Aroussi: TBA

Elite only
     

Similar Threads
Thread Thread Starter Forum Replies Last Post
I would like a Fixed Ratio position sizing spreadsheet PandaWarrior Psychology and Money Management 7 December 25th, 2014 01:25 PM
Why position sizing matters sdonahue MTPredictor 3 September 19th, 2014 04:54 PM
A Study in Risk Management and Position Sizing kuratti Trading Journals 32 November 16th, 2012 04:53 AM
Position Sizing by Van Tharp Laserdan Psychology and Money Management 21 July 8th, 2011 11:37 AM
Position sizing codes ptcm EasyLanguage Programming 2 January 2nd, 2011 04:24 PM


All times are GMT -4. The time now is 12:32 AM.

Copyright © 2017 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, +507 833-9432, info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts
Page generated 2017-12-16 in 0.12 seconds with 19 queries on phoenix via your IP 54.226.113.250