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Position Sizing by Van Tharp
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Position Sizing by Van Tharp

  #11 (permalink)
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Quoting 
Does your account balance change enough intraday to affect the number of contracts you can trade?

lol...no, but it would be nice to allocate different amounts per instrument, so set it in the strategey options, when running multi strats

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  #12 (permalink)
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Prtester View Post
Some time ago i post some example in the NT Forum, but don't develop any further, if someone interested, we can make it here.

Position Size Algorithm - NinjaTrader Support Forum

Hey thanks...I will see what i can do...

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  #13 (permalink)
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Prtester View Post
Some time ago i post some example in the NT Forum, but don't develop any further, if someone interested, we can make it here.

Position Size Algorithm - NinjaTrader Support Forum


Here it is from Ninja forum:


Quoting 
This is the NT default sample crossover strategy with a simple Position Size algorithm, I use 2 type of Position Size, Fix percent and Kelly, please comment on it, remember be kind itís free
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Maybe we can add some more Position Size method. If any want to jump in and help is welcome.

Possible enhancements: made the Position Algorithm a function to be call from any strategy. Add some scaling feature, etc.


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  #14 (permalink)
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Would you really want a position size algo within a strategy? I could see its use when examining the best mix for a portfolio of strategies with known Sharpe ratios, etc... but then you would be reinventing MPT, VaR, etc.

Also... when one's $100K account becomes a $200K account, would you trade double the size or park that $100K profit where you would get the risk-free rate instead?

Where does one cross the boundary between trade risk management (a single bet) and portfolio management (cumulative results of prior bets combined with risk-managing future bets)?

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  #15 (permalink)
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What i plan to do is divide my account up into sections...Futures, Stocks and Forex. Trade multiple Strats at the same time. So lets say I want to trade $50,000 in each of those 3 categories.

I want to start a strategy and tell it that I have $50,000 to start with. Then lets say i run 2 strats on two different instuments: Oil with 1% risk and ES with 1.5% risk.

I think the Volitility Position sizing would be very useful.

I will work on it and share what i come up with. If there is anyhing out there that already does this and I am reinventing the wheel, let me know.

Either way, I will work on it and share my code with the group

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  #16 (permalink)
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If you consider each strat to be an asset with a known standard deviation, Sharpe ratio, etc and what you are looking to do is work out an optimal position size for each asset in a basket of assets whose correllations are known or can be calculated, you are looking at Modern Portfolio Theory (MPT) by Markowitz. Your asset mix should land you on a point on the efficient frontier where you have the optimal risk/reward ratio. Google MPT&Markowitz and see if that is what you are looking for.

Excel might be a better application for building the model, with data on the strats coming from Ninja.

I haven't looked for it yet but if you can calculate correlation of a strat against, say, the SPX, that is handy for building an MPT-based basket. Metastock does that well.

Note MPT and several other theories have been hit over the past year because they rely on an assumed Guassian distribution of returns. Fat tail/black swan events are the enemy of Gaussian assumptions.

I've got a gazzilion books on this stuff so if you have a question fire away. If I don't know it I know where to look it up. Also, if anyone spots an error in my statements don't be shy and please do point it out.

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  #17 (permalink)
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I just struck gold with this thread!!!! Finally, some people that pay attention to the important things in trading! Hello friends!!


Laserdan View Post
I am reading Tharp's book and am really interested in position sizing.
I am keenly interested in the Percent Volatility Model he presnts in his book Trade your way to financial freedom

Laserdan, a big thanks for starting this fantastic thread! Are you or anyone else using Van Tharp's SQN or max expectancy in your ninja strategies? I posted the code I have here earlier today. I do find the SQN the most valuable but the max expectancy can provide insight but is much harder to generate useful results with if you do not have a large data set.


MXASJ View Post
Here you go. A JPEG and a Excel spreadsheet. Top part is based on how much you are prepared to risk per trade (2% of equity in this case), what the 14 period ATR is for the timeframe you are trading, and what your stop loss point is as ATR. It looks at margin as well and gives you the lower number of the two (contracts tradeble under stop loss rules vs. margin rules).

I've added a Kelly formula underneath. Please check the math on that first!

Critique it, change it, and post it back if you find it useful.

Mxasj, great spreadsheet my man! I actually found this thread because I was going to post a position sizing spreadsheet and thought I better search first. Your spreadsheet is far superior.

I'm not keenly familiar with Kelly but it's a risk model is it not? From a brief search on the internets it would seem the Kelly model is similar to max expectancy, what is your interpretation of it and how do you use it in your strategies?


Prtester View Post
Some time ago i post some example in the NT Forum, but don't develop any further, if someone interested, we can make it here.

Position Size Algorithm - NinjaTrader Support Forum

Prtester, I am always interested in furthering money management capabilities inside of an ATS. I see you are also using Kelly ratio. Do you guys have a NT "Type" to optimize on Kelly? I'd like to compare it to Van Tharp's max expectancy. Prtester, I use scaling a great deal in my strategies and I'd like to know what your thoughts were for using the Kelly ratio. What was your overview of how it would work (nevermind the technical code to make it work).

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  #18 (permalink)
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I found this about Kelly Criterion ratio:
Money Management Using the Kelly Criterion

So the principal is useful directly to position sizing much more so than expectancy. Now I just need to see about getting it inside of Ninja, am hoping someone has done this work already.

I took one of my systems with about 120 trades, a 65% win ratio and a w/l of 1.3 and the ratio came back as 0.38. So I am not sure what practical use this number is really telling me at this point because I do not risk more than 2% per trade.

Maybe you seasoned Kelly guys can help me understand it more. I am always looking for new methods of refining strategies to make them more efficient.

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  #19 (permalink)
Tucson, AZ
 
 
Posts: 418 since Aug 2009

TRADING IS SIMPLE:

* Price either goes up or down.
* No one knows what will happen next.
* Keep losses small and let winners run.
* POSITION SIZE = RISK / STOP LOSS
* The reason you entered has no bearing on the outcome of your trade.
* You can control the size of your loss (skill) but you can't control the size of your win (luck).
* You need to know when to pick up your chips and cash them in.

Do not make things complicated.

Account Balance = $1,000

Maximum Risk = 2% * Account Balance

Maximum Risk = 2% * $1,000 = $20

Example:

If you want to buy a stock and your risk is $20 with a stop loss of $0.20 per share, then you can trade 100 shares.

POSITION SIZE = RISK / STOP LOSS.

POSITION SIZE = $20 / $0.20 = 100

Simple.


Last edited by TheRumpledOne; September 6th, 2009 at 11:42 AM.
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  #20 (permalink)
Kharkov
 
 
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position sizing TOS code calculator ???


Hi , is there such TOS code (*.ts) or so to be embedded in TOS??? if yes please send it URL...

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