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Search: Posts Made By: Fat Tails
Forum: Psychology and Money Management September 28th, 2012, 04:10 PM
Replies: 109
Views: 37,679
Posted By Fat Tails
It is available here in post #65: ...

It is available here in post #65:

https://nexusfi.com/psychology-money-management/15602-risk-ruin-7.html#post207948
Forum: Psychology and Money Management September 25th, 2012, 03:49 AM
Replies: 109
Views: 37,679
Posted By Fat Tails
Bau250: He was referring to a win rate of 60% in...

Bau250: He was referring to a win rate of 60% in combination with a R-Multiple of 2:1. This would mean that if your risk is R, out of ten trades you would have 6 winning trades of 2R and 4 losing...
Forum: Psychology and Money Management July 23rd, 2012, 12:33 PM
Replies: 109
Views: 37,679
Posted By Fat Tails
Sample size mattters

I should nothing to add to your comment, as you have all said it.

If there is a shift in a market paradigm, then it does not make sense to include old data. As markets change all the time, a...
Forum: Psychology and Money Management July 23rd, 2012, 03:24 AM
Replies: 109
Views: 37,679
Posted By Fat Tails
Luger: I think that we are talking about two...

Luger: I think that we are talking about two different things here ....

(a) the risk that the trading system is correctly represented by the sample
(b) the risk derived from the variance of the...
Forum: Psychology and Money Management July 22nd, 2012, 03:30 PM
Replies: 109
Views: 37,679
Posted By Fat Tails
I subscribe to what you have written. The...

I subscribe to what you have written.

The Bernoulli distribution is a special case, which can be used to build a simple model. The simple model is very useful as you can already show a lot of...
Forum: Psychology and Money Management July 22nd, 2012, 10:49 AM
Replies: 109
Views: 37,679
Posted By Fat Tails
It is a Monte Carlo simulator. This is what a...

It is a Monte Carlo simulator. This is what a Monte Carlo Simulator does:

Let us assume for simplicity that you have a sample strategie which produced 100 trades during a backtest. Now you watch...
Forum: Psychology and Money Management July 21st, 2012, 09:47 AM
Replies: 109
Views: 37,679
Posted By Fat Tails
Before I start, there is a small glitch on the...

Before I start, there is a small glitch on the right chart, as the visual part shows 11 wining trades and 8 losing trades. However, the figures below are correct. Just the last and the third but the...
Forum: Psychology and Money Management July 20th, 2012, 01:55 PM
Replies: 109
Views: 37,679
Posted By Fat Tails
The other book I have read by William Poundstone...

The other book I have read by William Poundstone was a book on game theory. I enjoyed reading it as well.
Forum: Psychology and Money Management July 11th, 2012, 07:35 PM
Replies: 109
Views: 37,679
Posted By Fat Tails
artemiso: Brilliant post, you hit the nail on the...

artemiso: Brilliant post, you hit the nail on the head.

However, there is one minor glitch. Transaction costs do matter. If you trade ever smaller timeframes, transaction costs will outgrow the...
Forum: Psychology and Money Management June 12th, 2012, 03:00 PM
Replies: 109
Views: 37,679
Posted By Fat Tails
I understand your position from a psychological...

I understand your position from a psychological point of view. George Soros called this going for the jugular .... What they probably meant is that once your have been profitable, it makes sense to...
Forum: Psychology and Money Management June 12th, 2012, 08:00 AM
Replies: 109
Views: 37,679
Posted By Fat Tails
I am not seeing any advantage of following this...

I am not seeing any advantage of following this path. I would continue to trade the system with the R-Multiple of 1 and the win rate of 60%.

The only reason to trade two different systems in...
Forum: Psychology and Money Management May 6th, 2012, 08:37 PM
Replies: 109
Views: 37,679
Posted By Fat Tails
The case against scalping is a case based on...

The case against scalping is a case based on commissions, slippage and the spread. There is no argument against scalping if

-> you do not pay retail commissions, but have an exchange seat and...
Forum: Psychology and Money Management May 6th, 2012, 07:02 PM
Replies: 109
Views: 37,679
Posted By Fat Tails
Anagami: Very dangerous conclusion: You have a...

Anagami: Very dangerous conclusion: You have a nice system and you hope to make a win rate of 80%. If the win rate drops by 10% to 72%, your expectancy drops to zero.

Expectancy at 80% : 0.8 *...
Forum: Psychology and Money Management May 6th, 2012, 06:42 PM
Replies: 109
Views: 37,679
Posted By Fat Tails
Anagami: First of all, I agree with your...

Anagami: First of all, I agree with your findings. The 40/40 system only requires 112 trades as compared with 218 trades of the 20/20 system. Based on volatility expectations, however the 20/20...
Forum: Psychology and Money Management May 6th, 2012, 10:17 AM
Replies: 109
Views: 37,679
Posted By Fat Tails
The excel model is just from the thread "Risk of...

The excel model is just from the thread "Risk of Ruin". You can actually read through the stuff and download the excel model from post #65, as per link below:
...
Forum: Psychology and Money Management May 5th, 2012, 12:02 PM
Replies: 109
Views: 37,679
Posted By Fat Tails
Correct. The 20/20 system cannot take the...

Correct.


The 20/20 system cannot take the same number of trades over the same time period, but I had already taken it into account! Based on the square root relationship between volatility and...
Forum: Psychology and Money Management May 4th, 2012, 04:41 PM
Replies: 109
Views: 37,679
Posted By Fat Tails
You cannot define something, which is already...

You cannot define something, which is already defined. Scalping is

(1) a legitimate method of arbitrage of small price gaps created by the bid-ask spread.
(2) a fraudulent form of market...
Forum: Psychology and Money Management May 4th, 2012, 11:58 AM
Replies: 109
Views: 37,679
Posted By Fat Tails
Anagami: If you talk about optimal f, the results...

Anagami: If you talk about optimal f, the results will be terrible for scalping, once you include

-> the spread as created by using stop market orders (stop loss) and limit orders (profit target)...
Forum: Psychology and Money Management May 3rd, 2012, 09:09 PM
Replies: 109
Views: 37,679
Posted By Fat Tails
I was astonished as well the first time that I...

I was astonished as well the first time that I realized that the winning percentage prevails over the R-multiple, but in the end it is just mathematics.

The concept for Optimal F points you into...
Forum: Psychology and Money Management May 3rd, 2012, 06:10 PM
Replies: 109
Views: 37,679
Posted By Fat Tails
As far as my understanding goes, Anagami has...

As far as my understanding goes, Anagami has presented Monte Carlo Simulations. The worst path on the chart allows for an estimation of the maximal drawdown.

Bad runs are accounted for in that...
Forum: Psychology and Money Management May 3rd, 2012, 04:45 PM
Replies: 109
Views: 37,679
Posted By Fat Tails
There Is a Clear Answer to That Question

The expectancy of the two alternatives is identical, the answer lies elsewhere. You will find it in the thread on the risk of ruin. To show this, we need to make some assumptions on the way we trade...
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