Acrary's Strategy Formation

Quote from ES335:


I was wondering if you could clarify the above from Acrary. He recommends having at least 100 trades in your sample to start with. Ok, so let's say you win 60%, lose 40% in that 100 trade sample, so 60 winners, 40 losers. The probability of 5 losers in a row is 0.4 raised to the power of 5 which is ~ 1%.

(i) So does that mean that once out of 100 trades, you can expect to have 5 consecutive losers and that out of 200 trades, you can expect to have a run of 5 consecutive losers occur two times?

(ii) Also, what would happen if you are using n systems, each with its own win rate and the sum total of all trades from all systems would lead to a given win rate as well. How would you compute the probability of consecutive losers? Could it be that diversification of multiple systems could also lead to a lower probability of consecutive losses? Does anyone know the math for this?

(iii) Back to Acrary: Why does he multiply the number of consecutive losses by 3 to get to the trading cycle? Does anyone know the reasoning behind this?

Thx in advance
ES335
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Please don't anyone take this as speaking for acrary because I'm certainly not qualified, but

I All of the statistics work that acrary did seemd to assume a random distribution of trades. Not everyone has this. If that assumption holds, you are correct to assume that you will get approxamitly 2 streaks of 5 loses in that situation. (Remember as size goes up the probability of weird streaks increases.)

II In Acrarys other stuff, he goes over how multiple uncorrelated systems reduce losses/increase stability. Just back test the two systems togehter and see what the results would look like and use them together. calculate the same as above. Not sure how to make it more elegant, but should do the trick.

III not sure the exact math behind this, but my guess is at least on peroid to get back the loss, the other two for room for error in having losses in those periods.

Hope that helps. That is my understandings, if anyone has another view that would be great.
 
Wondering if anyone actually tried to use Acrary's strategies? He seems to be a very smart guy but alas no longer post here.
 
Quote from billp:

Wondering if anyone actually tried to use Acrary's strategies? He seems to be a very smart guy but alas no longer post here.
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I think he retired from active trading. He didn't blow up his account.
 
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