NexusFi: Find Your Edge


Home Menu

 





Anyone Know the Name of the Position Sizing Formula?


Discussion in Psychology and Money Management

Updated
      Top Posters
    1. looks_one aotc with 2 posts (0 thanks)
    2. looks_two planetkill with 1 posts (2 thanks)
    3. looks_3 SBtrader82 with 1 posts (3 thanks)
    4. looks_4 unison31 with 1 posts (0 thanks)
    1. trending_up 1,324 views
    2. thumb_up 5 thanks given
    3. group 6 followers
    1. forum 4 posts
    2. attach_file 0 attachments




 
Search this Thread

Anyone Know the Name of the Position Sizing Formula?

  #1 (permalink)
 aotc 
New York NY
 
Experience: Intermediate
Platform: NinjaTrader
Trading: /es
Posts: 16 since Dec 2014
Thanks Given: 7
Thanks Received: 11

A while back I remember reading about a formula for position sizing named % K or something similar, where if one knows their approximate probabiliy of success, account size, and risk reward as well as perhaps some other variables what the optimal risk or position sizing would be. I have been searching on the internet for this, but cannot find it. Does anyone know what the name of this formula/method is? Thank you!

Started this thread Reply With Quote

Can you help answer these questions
from other members on NexusFi?
Futures True Range Report
The Elite Circle
Deepmoney LLM
Elite Quantitative GenAI/LLM
My NT8 Volume Profile Split by Asian/Euro/Open
NinjaTrader
Are there any eval firms that allow you to sink to your …
Traders Hideout
ZombieSqueeze
Platforms and Indicators
 
Best Threads (Most Thanked)
in the last 7 days on NexusFi
Get funded firms 2023/2024 - Any recommendations or word …
59 thanks
Funded Trader platforms
36 thanks
NexusFi site changelog and issues/problem reporting
25 thanks
GFIs1 1 DAX trade per day journal
19 thanks
The Program
18 thanks
  #2 (permalink)
 planetkill 
New York City + NY/United States
 
Posts: 347 since Sep 2018
Thanks Given: 107
Thanks Received: 294

Kelly criterion
aotc View Post
A while back I remember reading about a formula for position sizing named % K or something similar, where if one knows their approximate probabiliy of success, account size, and risk reward as well as perhaps some other variables what the optimal risk or position sizing would be. I have been searching on the internet for this, but cannot find it. Does anyone know what the name of this formula/method is? Thank you!


Reply With Quote
Thanked by:
  #3 (permalink)
 aotc 
New York NY
 
Experience: Intermediate
Platform: NinjaTrader
Trading: /es
Posts: 16 since Dec 2014
Thanks Given: 7
Thanks Received: 11



planetkill View Post
Kelly criterion

Thank You!

Started this thread Reply With Quote
  #4 (permalink)
 
SBtrader82's Avatar
 SBtrader82   is a Vendor
 
Posts: 587 since Feb 2018
Thanks Given: 222
Thanks Received: 1,333

Be careful about Kelly Criterion, most people don't have enough math background to understand where it comes from and how theoretical it is.
The result is extremely theoretical, as a former phd student in information theory I understand how the formula is derived. It is very interesting and completely useless.
Basically all assumptions behind Kelly are not true in reality, in particular the assumption about the stochastic process representing the market price probability distribution.

Be sure to understand Kelly's limitations before using it.

aotc View Post
A while back I remember reading about a formula for position sizing named % K or something similar, where if one knows their approximate probabiliy of success, account size, and risk reward as well as perhaps some other variables what the optimal risk or position sizing would be. I have been searching on the internet for this, but cannot find it. Does anyone know what the name of this formula/method is? Thank you!

Sent using the NexusFi mobile app

Follow me on Twitter Visit my NexusFi Trade Journal Reply With Quote
  #5 (permalink)
unison31
San Diego, California/United States of America
 
Posts: 5 since Feb 2021
Thanks Given: 1
Thanks Received: 1

Additionally, even if you know all the parameters (for example, in a coin toss game), most people will still feel that the full Kelly bet has too much return volatility.

Reply With Quote




Last Updated on February 25, 2021


© 2024 NexusFi™, s.a., All Rights Reserved.
Av Ricardo J. Alfaro, Century Tower, Panama City, Panama, Ph: +507 833-9432 (Panama and Intl), +1 888-312-3001 (USA and Canada)
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.
About Us - Contact Us - Site Rules, Acceptable Use, and Terms and Conditions - Privacy Policy - Downloads - Top
no new posts