Need input on max position size

B

bln

What is the highest risk I can take with a strategy with the following metrics:

Win/loss ratio: 79%
Profit/loss ratio: 0.66
Longest losing streak: 2
Worst losing DD sequence: L-L-W-L-L

How hard can one run this without blowing up.
 
DevBru said:
What is the draw down percentage? What time period do these statistics cover? How many trades is it based on?
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Duration: 6 years
Trades: 95

Max Draw Down in percent is a unknown parameter as it is a derived variable of the selected position risk in percent for each trade.

Example of $10,000 equity and selected risk per trade is 5%, the MDD comes out like this:

0.05 * 0.66 = 0.0330
Risk per losing trade 5%, win per winning trade 3.3%

(10000 * 0.95^4) * 1.033
8413.84956250000 (equity after the max draw down)

((8413.85/10000)-1)*100 = -15.8615
We get an MDD of -15.86%
 
I recommend not using any leverage. 95 trades is a very small sample set. Despite having a nice looking backtest I guarantee you will have future periods where your performance is worse than this and you will question your strategy. If you use leverage you may have nothing left after a long period of losing trades.
 
bln said:
Duration: 6 years
Trades: 95

Max Draw Down in percent is a unknown parameter as it is a derived variable of the selected position risk in percent for each trade.

Example of $10,000 equity and selected risk per trade is 5%, the MDD comes out like this:

0.05 * 0.66 = 0.0330
Risk per losing trade 5%, win per winning trade 3.3%

(10000 * 0.95^4) * 1.033
8413.84956250000 (equity after the max draw down)

((8413.85/10000)-1)*100 = -15.8615
We get an MDD of -15.86%
More...
%%
6 years maybe enough?? NOT likely 2 will be the longest lose streak, its real strange how it seldom gets better , usually a bit worse.............................................................
 
murray t turtle said:
%%
6 years maybe enough?? NOT likely 2 will be the longest lose streak, its real strange how it seldom gets better , usually a bit worse.............................................................
More...

yes. long enough there will a longer losing streak than the current observed one.

did some compound probability calcs.

2 losing streak = 4.41% probability (5 streaks in 100 trades)
3 losing streak = 0.92% (1 in 100)
4 losing streak: 0.19% (2 in 1000)
 
bln said:
yes. long enough there will a longer losing streak than the current observed one.

did some compound probability calcs.

2 losing streak = 4.41% probability (5 streaks in 100 trades)
3 losing streak = 0.92% (1 in 100)
4 losing streak: 0.19% (2 in 1000)
More...
%%
Great thing about beating the benchmark SPY; most dont do that 10 years in a row:D:D. So make sure to do SSO some /LOL
 
easymon1 said:
Is this a strat that you developed or one you have?
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One I have developed and have. Been trading it with real money since June and it's been performing good.

Each trade is fixed loss and fixed win in dollar or percentage.
 
bln said:
One I have developed and have. Been trading it with real money since June and it's been performing good. Each trade is fixed loss and fixed win in dollar or percentage.
More...
Per your question, "What is the highest risk I can take with a strategy with the following metrics:"
Ryan Jones' book on fixed ratio "The Trading Game" referenced above, and others, show methods of position sizing and managing money based on past performance. He compares the results of a few methods on account equity curve.
To get Jones' view on the subject, just copy-paste the URL found in the link above into your browser address bar and see the math. Why fixed loss and fixed win?
 
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