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The rule among "professional" gamblers, especially those who engage in negative-expectation games like roulette, is "Bet with the Trend or not at all." The trend in this case is three or more like events in a row, e.g., three or more black numbers in a row. So if you started betting after the...

This doesn't make sense. A trend is not a single-time event like the outcome of a roulette spin. Unless you're claiming that your trends immediately reverse with no intervening chop, they most certainly aren't occurring "in a row". And of course to have a trend eventually follow the most recent...

No. It is important that you win more money than you lose. Discipline does not automatically equate to profits. Without a proven trading strategy, how you conduct yourself won't matter as far as your trading success is concerned.

So which method of data adjustment do you use? And who is your vendor?

Trading can be regarded as timing strategy(s) combined with a sizing strategy. Math is pretty much worthless for timing AFAICT. Creativity is much more valuable. For sizing, math is indispensable ... unless you get too much of it. Mathematicians are surprisingly (to me) inept at figuring...

I'm not a quant. Not interested in pricing models or market-neutral strategies. Anyway I want to ask the futures backtesters why they chose the method of data adjustment they use and whether the data is user-spliced or vendor-spliced.

Read the article he posted. The type of splicing matters.

So is it safe to assume that you have never used a continuous contract yourself? I am looking for feedback from those who have backtested futures so they can answer practical questions about the actual splicing of contracts.

Let's try this again. Has anyone here used backtesting as part of their learning about futures trading? If so, how did you construct your continuous contract? Thanks.

How could I possibly answer that with out having your trade return history? Optimal trading fractions aren't made in a vacuum.

So you named this thread "Rosebud" because it was started shortly after Orson Welles' birthday?? That's ... different. OK, thanks for not leaving us hanging like the "Obvious" thread OP.

Ah geez! This thread is turning into another damn "Why is the Obvious ..." type thread. :( Thanks, nitro. :mad:

Presumably backtesting is a part of this learning process. How else will you know if your trading plan is worth pursuing? Given that we're talking about futures, how do you go about constructing the continuous contract you need for backtesting? In particular, I'm wondering about ratio-adjusted...

Nobody cares enough about leverage space to even review this book, and it's been out for six years. :p http://www.amazon.com/Leverage-Space-Trading-Model-Reconciling/dp/0470455950/ref=sr_1_6?s=books&ie=UTF8&qid=1431182113&sr=1-6

I never claimed the formula I posted is perfect. All Kelly formulae are necessarily approximations, except for the binary case (i.e., coin flips and the simplest casino bets). The problem with the 'classic' Kelly formula for traders is that it tries to fit the complexity of trading into the...

OK, this is my last post on this sub-topic . After one loss, your drawdown is 1-(1-.05*7.5) = 37.5% After 2 losses, your drawdown is 1-(1-.05*7.5)^2 = 61% After 3 losses, your drawdown is 1-(1-.05*7.5)^3 = 76% After 4 losses, your drawdown is 1-(1-.05*7.5)^4 = 85% After 5 losses...

Two loses in a row will give you a 61% drawdown on your equity. And if your luck is so bad that you experience a string of losses in the beginning (with no compensating wins) enough to wipe you out, that's prolly a sign that you shouldn't be trading. :p

Of course. The most you could lose on any single trade is 5%, which means you'd have to trade 20 times your account to risk losing it all at once. You're only trading 7.5 times your account. When you lose, you lose 37.5%, but when you win, you gain 150%. These are equally likely outcomes.

The formula computes 7.5, not 7.5%

Thanks for pointing that out. Fortunately, this is an easy fix: Nk = max[0, s1]*(s2*s2 - s1*s3)/(s2*s2*s2 + s1*s1*s4 - 2*s1*s2*s3)