Increasing Size During Drawdown

[oldtime]

Quote from bone:

And I also suggested to you in a previous post that you do the exercise yourself, using your own trading statements. Your drawdown characteristics and your trading system is unique to you. As I posted before, it is easy enough for you to run the numbers for yourself on your own trading results. And much more relevant to your situation. Getting lazy in your old age ?

yes, possibly, at the time I was trading a system that used constant size

thank G-d I freed myself from that idiocy

size is everything

especially if you are spreading

 

[SimpleTrades]

Quote from SimpleTrades:

Have you run the numbers on a system that adds through a gradually decreasing size (S)?

For example: S + S/2 + S/4 + S/8 + ..... = 2S.

I mention this Oldtime, because you are less likely to go bust if you choose a converging series rather than a diverging series.

S + 2S + 4S + 8S + ...... = infinity, is a diverging series.

 

[kut2k2]

Quote from oldtime:

far be it from me to compare myself to Warren Buffet

but he will buy a company

and if the price goes lower

he will buy more

According to Thorp, Buffet is a Kelly investor, which is an anti-Martingaling risk management strategy. If he buys more stock as the price goes down, it's because the company fundamentals tell him to, not because of some Martingale mysticism.

 

[oldtime]

Quote from kut2k2:

According to Thorp, Buffet is a Kelly investor, which is an anti-Martingaling risk management strategy. If he buys more stock as the price goes down, it's because the company fundamentals tell him to, not because of some Martingale mysticism.

far be it from me to defend Martingale, nice work if you have infinite capital,

this isn't an averaging down thread

that's another place for another crowd

it's a constant betting size thread

and I just asked the question years ago to see if anybody had run the numbers

and it reverts back to "The Gambler's Fallacy"

so stop being a dumbshit and start contributing

 

[oldtime]

In otherwords, with a 50/50 prop, what happens if you increase size after a larger than expected drawdown?

 

[oldtime]

Quote from oldtime:

In otherwords, with a 50/50 prop, what happens if you increase size after a larger than expected drawdown?

it's really not open to debate, they have people on ET that are mathematicians, and that's all they do is run numbers, and they can tell you where you are thinking wrong.

 

[kut2k2]

Quote from oldtime:

far be it from me to defend Martingale, nice work if you have infinite capital,

this isn't an averaging down thread

that's another place for another crowd

it's a constant betting size thread

and I just asked the question years ago to see if anybody had run the numbers

and it reverts back to "The Gambler's Fallacy"

so stop being a dumbshit and start contributing

How am I not contributing when I just explained to you why Buffet does what YOU brought up? And how is it a constant betting size thread when the title is "Increasing Size during Drawdown", dumbshit?

Have you been checked for Alzheimer's lately?

 

[oldtime]

Quote from kut2k2:

How am I not contributing when I just explained to you why Buffet does what YOU brought up? And how is it a constant betting size thread when the title is "Increasing Size during Drawdown", dumbshit?

Have you been checked for Alzheimer's lately?

well, perhaps I over spoke. Yes, the original question addressed a constant betting size.

thanks for the contribution

Yes, they checked me, but I can't really remember what the diagnosis was

 

[kut2k2]

Quote from oldtime:

In otherwords, with a 50/50 prop, what happens if you increase size after a larger than expected drawdown?

So now it's a 50/50 proposition?

See, this what marks you as a gambler, not a trader. Traders don't take bets lacking positive expectation. We couldn't care less about bets with zero or *gag* negative expectation. No money management strategy will turn them into positive expectation.

But fwiw my guess is that increasing size after any drawdown in a 50/50 prop will just accelerate your speed down the road to ruin.

 

[SimpleTrades]

Quote from kut2k2:

So now it's a 50/50 proposition? See, this what marks you as a gambler, not a trader.

With forex? I don't really agree if you're choosing major currency pairs. If you're sizing with an understanding that a major currency pair trades within a range, you actually can rely on 50/50 and gradually increase size as it goes against you. It may take a long time though before it goes back in your favour. In theory ruin isn't possible unless it steps outside of the long term range.

For example EURUSD: [L,U] = (.8, 1.6) approximately. Your maximum potential loss is therefore (1.6 - .8 ) X 10000 = 8000 pips. Ruin is still possible if it steps outside of that range, but how probable is this? I think if you add according to a converging series, you can guarentee a profitable trade most of the time. However, how long it takes to achieve that profitable trade depends on the rate of convergence. If you add according a diverging series, you will likely run out of money before the trade goes in your favour.