How much should you risk?

[K-Pia]

@kut2k2
If that ain't great returns for you.
Base Capital: 100 #Trades:1200
Risk: 12,5% Ratio:1,8 P(G):0,59
MaxDraw: 7! Minimum: 53

That stream is an aggregation of worst trades taken from 10 randomly generated series.

 

[botpro]

Here's a more exact result:
MaxGrowthRate=2.87735% @ fraction=77.793%

 

[kut2k2]

Here's a more exact result:
MaxGrowthRate=2.87735% @ fraction=77.793%

Well done.

 

[globalarbtrader]

No way.
GAT goes broke.
And I retire right now.

Ps: I've changed my mind (Edited my post) while you made your calculations. Sorry.

I'd make 1,4% returns for every % risked.
Knowing I'd invest 13%.

And full kelly gives me 36%.
We know full kelly's insane.

I wouldn't go broke, because there is a difference between a math problem and reality.

I run my actual trading account at something like one fifth Kelly.

GAT

PS In real life there is rarely extra credit for more than one significant figure ...

 

[botpro]

Btw, here's the curve, using intervalls of size 0.01:

 

[Visaria]

what does the x and y axis represent?

 

[kut2k2]

I wouldn't go broke, because there is a difference between a math problem and reality.

I run my actual trading account at something like one fifth Kelly.

GAT

Using the new Kelly formula, you can move up to half-Kelly and be perfectly safe.

 

[botpro]

what does the x and y axis represent?

x-axis: Fraction_of_Acct in intervalls of 1/100% (ie. 100*100=10000 parts = 100%)
y-axis: Growth%

As said, the maximum is:
Growth=2.87735% @ fraction=77.793%

 

[globalarbtrader]

Using the new Kelly formula, you can move up to half-Kelly and be perfectly safe.

Kelly tells me the absolute maximum I should risk. It doesn't tell me whether I'm going to be happy with that level of risk. Increasing my risk by 2.5 times would terrify me. I'd be too tempted to meddle with my system. I don't need the extra income, thanks very much.

As well as that you need to consider:

- leverage required (if my strategy had natural risk of 1% a year - don't fancy gearing that up 25x)
- leverage available (not a problem trading futures, but a long only equity investor is going to get ~20% vol a year)

GAT

 

[Visaria]

Bit late now, but i thought i would have another go, i came up with an estimate of 51% from doing simple calc on a calculator. Wrong, i know since botpro has come up with the correct answer from using a program, but it was a simple estimate that took a minute to do.