Position Sizing and Rapid Growth

Quote from jack hershey:

Lets look more closely at the difficulty of not entering until the opening range BO occurs.

We are faced with several difficulties. The opening bars can sometimes be as volatile as the target and stop that was set.

Further, if a person chooses to do the opening range breakout beyond a beginner level he is going to enter with a subfractal signal that is within the oopening range AND be independent of price measurements.

We can also see that any other adjunct, in terms of leading indicators of price, also occur before the BO and are terrific. There are seven of these. Letting them flow in the order of events that they portray is like insurance.

So these entries are going to be coatail entries of the smart money and the DOM wall that could complete meeting the first trade profit taking will not even come into the picture.

The exit for the day (I am restricting a sloooow trading regime of one trade per day) will come before the stop is tightened from 2.5 down to 2.0 points.

There are some other neat things that are not part of making the 65 day run to 200,000. It will be before most 10am news and before the first internal on the first dominant traverse of the first channel of the day.

Lets take up failures to BO on the open. If a person is a poker player and setting a traget than can be met before the river even flows, what is the deal? The whinning is all about managing money on high leverage, presumably. Sick has stated he will put more chips on the table to get the initial move of the daily range expansion if he blows it and gets stopped out. LOL

What is this poker player really doing? Well you guessed it rather slowly and he has been laughing. He is playing with the smallest chip he can to begin to play. He cuts his leverage as much as possible BEFORE he even ups the anti.

I think it is very funny that he has played all you guys as he has. He kept flashing dirty cards to keep YOUR eyes off his vey conservative strategy too.

Minumum bet; minimum raise. You guys got taken from the first card played.............LOL......


BOTTOM LINE ... TAKE THE TROUBLE TO NOTICE IT ONLY TAKES 65 TRADES TO GO FROM 500 BUCKS TO 230,000. lol WHAT A BUNCH OF PEOPLE YOU GUYS ARE.....lol. 65 DAYS HO HUM.......lol.....
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It is very late here. But seeing your "approval" and some rambles about him "playing" us demonstrates that the abilities of Jeck Hershey cannot be understimated...

Sick is missing one thing - a serious edge. I get the sense of someone who likes others to think he is important and savvy. His "gambling" approach as some kind of advanatage. Blah Blah.

The reality is, probabilities and the market are cold and cruel. "It only takes 65 trades from $500 to 230,000? THat must be why people do it all the time... not.
 
Quote from euclid:

He says he's hitting 1.5R consistently at better than 50%.
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HE also says he sill start with $700 and go to $200,000 in 65 days. Contrary to every sane money management ever written. He further said he owned a top 500 construction company featured in a magazine and that we could see it. This proved he didn't need the money. So I asked him for the website & phone# of the company to verify the claims and then he suddenly clammed up. This coupled with the fact there is absolutely no proof he ever traded successfully, I think all his claims can be called into question. So...

The singular question is, why so many newbies are prostrating and "wishing him luck," when every trader who actually uses real money and has success, thinks this person fell out of the stupid tree, and hit every branch on the way down.
 
Quote from TraderZones:

HE also says he sill start with $700 and go to $200,000 in 65 days. Contrary to every sane money management ever written. He further said he owned a top 500 construction company featured in a magazine and that we could see it. This proved he didn't need the money. So I asked him for the website & phone# of the company to verify the claims and then he suddenly clammed up. This coupled with the fact there is absolutely no proof he ever traded successfully, I think all his claims can be called into question. So...

The singular question is, why so many newbies are prostrating and "wishing him luck," when every trader who actually uses real money and has success, thinks this person fell out of the stupid tree, and hit every branch on the way down.
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No point stressing about it, the proof is always in the pudding!

Regards

Johno
 
FIXED RATIO Position Sizing (by Ryan Jones)

OK, this is one of several generally legit position sizing algorithms (note, missing a couple of graphics - see original article at http://www.stator-afm.com/fixed-ratio-position-sizing.html). It is not the absolute best acording to tests by several organizations, but is still a legitimate way to undertake account growth. Still, without an edge and good money management, there are no guarantees of anything.

Note that the inventor, Ryan Jones, aggressively tried to market this method for thousands of dollars in different variations. I used to get spammed by him from multiple "corporations" including a split with one of his "partners."

But the logic has been freely available on the net for many years.

Fixed Ratio Position Sizing

In fixed ratio position sizing the key parameter is the delta . This is the dollar amount of profit per contract to increase the number of contracts by one. A delta of $3,000, for example, means that if you're currently trading one contract, you need to increase your account equity by $3,000 to start trading two contracts. Once you get to two contracts, you need an additional profit of $6,000 to start trading three contracts. At three contracts, you would need an additional profit of $9,000 to start trading four contracts, and so on. For stock trading, a "contract" can be interpreted as a fixed number of shares, such as 100 shares.

Fixed ratio position sizing was developed by Ryan Jones in his book "The Trading Game," John Wiley & Sons, New York, 1999. Based on an equation presented by Jones, it's possible to derive the following equation for the number of contracts in fixed ratio position sizing:

N = 0.5 * [(1 + 8 * P/delta)^0.5 + 1]

where N is the number of contracts, P is the total closed trade profit, and delta is the parameter discussed above. The carat symbol ( ^ ) represents exponentiation; that is, the quantity in parentheses is raised to the power of 0.5 (square root).

A few points are worth noting. The profit, P , is the accumulated profit over all trades leading up to the one for which you want to calculate the number of contracts. Consequently, the number of contracts for the first trade is always one because you always start with zero profits ( P = 0 ). Also, as you accrue more profits, the number of contracts increases more slowly. A $10,000 profit made early in a sequence of trades will increase the number of contracts more than a $10,000 profit made after many other profitable trades.

Unlike with fixed fractional trading , the trade risk is not a factor in the fixed ratio equation. All that matters is the accumulated profit and the delta. The delta determines how quickly the contracts are added or subtracted. Also note that the account equity is not a factor. Changing the starting account size, for example, will not change the number of contracts, provided there is enough equity to continue trading.

As an example, consider the series of trades below. The starting account size was $50,000. The profit/loss per contract is shown in the second column ("PL/Contr"). The next column is the trade risk, which is not used in fixed ratio position sizing. The delta was $1500. The next column shows the number of contracts computed according the equation above. Multiplying the number of contracts by the profit/loss per contract results in the position profit/loss ("Pos PL"), which adds to the current equity value to give the new value of account equity, shown in the last column.


Trades and number of contracts in an example of fixed ratio position sizing.

Notice how the number of contracts starts at one and slowly increases as profits accumulate. If a smaller delta had been used, the number of contracts would have increased more quickly but would have dropped more after a loss.

The equity curve and the number of contracts is shown below over a longer span of trades from the same market system. The bar chart, below the equity curve, illustrates how the number of contracts increases with increasing profits.



Equity curve and number of contracts in an example of fixed ratio position sizing.

Because the number of contracts always starts at one, the fixed ratio method usually produces better results for smaller accounts. For larger accounts, it may take an unreasonable amount of time to increase the number of contracts to a level that takes full advantage of the available equity.
 
Quote from Stok:

ehorn, where did u get those clock timers?
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There are many pages of script and snippets for all sorts of things in the collection under the thread called Hershey softtware or the like here in ET and there is stuff at fidelity as well.

On page 17 and 18 (@five posts per page) of the sicktrader trading thread he announced the open BO trade which as suggested here would be during the opening range BO and in the interval where his stops are the loosest for the day. The target is always 3 pts and the stop is 2 pts or during the opening 2.5pts.

You can see his risk of ruin keeps going down as the days go by. Look at the cash column and compare it to the capital in the trades. I didn't add in all those measuring columns in the Excel since it was just set up to make a rough semilog chart of the Plan for the money and risk management. Someone may wish to put up the chart and we can track the daily progress relative to the conservative Excel plan.

Later we can review opening BO trading rules and see just how risk free they are. The key ingredient is to set the opening stop in a relative position compared to the entry such that the geometry precludes stopping out before the target is reached. A hendy reference for this is called clean page four and it is annotated in a way that it is easy to see the relationship of three things: the leading indicators of the open BO; the horizontal line that determines the entry in advance and the lelative position of the stop relative to the regions where price must go in the future.

This all , apparently, was unknown to the proferer of the stuff traderzones is quoting in this thread.

The clean page four is posted at the beginning of the current ongoing dissertation on volume. (Elsewhere). Use the BO volume as a facet of the fail safe nature of the opening range BO. You can also read up on pairs trading the open. It is not necessary to have another instrument to use the opening trading of pairs theory with just one instrument.

Rarely, there are opens which can take advantage of the opening bounce off the RTL. For examples in June 09 see the 4th and 11th, (short and long respectively). The openrange BO was on bar 2 on the 4th, however. Bar 3 on each day marked the trade bounce.

I probably should post one for one (with traderzones), excellent logic for many of the opening range BO trades. If he puts up any excellent ones, so will I. So far, this is just beginner stuff.
 
I can't find any mention of you or your "methods" on the Peak Trader Pro website... what happened?

What's at Fidelity? Are you talking about the unprofitable Wealthlab scripts that spydertrader wrote?
Quote from jack hershey:

There are many pages of script and snippets for all sorts of things in the collection under the thread called Hershey softtware or the like here in ET and there is stuff at fidelity as well.
More...
 
Quote from TraderZones:

FIXED RATIO Position Sizing (by Ryan Jones)

OK, this is one of several generally legit position sizing algorithms (note, missing a couple of graphics - see original article at http://www.stator-afm.com/fixed-ratio-position-sizing.html). It is not the absolute best acording to tests by several organizations, but is still a legitimate way to undertake account growth. Still, without an edge and good money management, there are no guarantees of anything.

Note that the inventor, Ryan Jones, aggressively tried to market this method for thousands of dollars in different variations. I used to get spammed by him from multiple "corporations" including a split with one of his "partners."

But the logic has been freely available on the net for many years.

Fixed Ratio Position Sizing

In fixed ratio position sizing the key parameter is the delta . This is the dollar amount of profit per contract to increase the number of contracts by one. A delta of $3,000, for example, means that if you're currently trading one contract, you need to increase your account equity by $3,000 to start trading two contracts. Once you get to two contracts, you need an additional profit of $6,000 to start trading three contracts. At three contracts, you would need an additional profit of $9,000 to start trading four contracts, and so on. For stock trading, a "contract" can be interpreted as a fixed number of shares, such as 100 shares.

Fixed ratio position sizing was developed by Ryan Jones in his book "The Trading Game," John Wiley & Sons, New York, 1999. Based on an equation presented by Jones, it's possible to derive the following equation for the number of contracts in fixed ratio position sizing:

N = 0.5 * [(1 + 8 * P/delta)^0.5 + 1]

where N is the number of contracts, P is the total closed trade profit, and delta is the parameter discussed above. The carat symbol ( ^ ) represents exponentiation; that is, the quantity in parentheses is raised to the power of 0.5 (square root).

A few points are worth noting. The profit, P , is the accumulated profit over all trades leading up to the one for which you want to calculate the number of contracts. Consequently, the number of contracts for the first trade is always one because you always start with zero profits ( P = 0 ). Also, as you accrue more profits, the number of contracts increases more slowly. A $10,000 profit made early in a sequence of trades will increase the number of contracts more than a $10,000 profit made after many other profitable trades.

Unlike with fixed fractional trading , the trade risk is not a factor in the fixed ratio equation. All that matters is the accumulated profit and the delta. The delta determines how quickly the contracts are added or subtracted. Also note that the account equity is not a factor. Changing the starting account size, for example, will not change the number of contracts, provided there is enough equity to continue trading.

As an example, consider the series of trades below. The starting account size was $50,000. The profit/loss per contract is shown in the second column ("PL/Contr"). The next column is the trade risk, which is not used in fixed ratio position sizing. The delta was $1500. The next column shows the number of contracts computed according the equation above. Multiplying the number of contracts by the profit/loss per contract results in the position profit/loss ("Pos PL"), which adds to the current equity value to give the new value of account equity, shown in the last column.


Trades and number of contracts in an example of fixed ratio position sizing.

Notice how the number of contracts starts at one and slowly increases as profits accumulate. If a smaller delta had been used, the number of contracts would have increased more quickly but would have dropped more after a loss.

The equity curve and the number of contracts is shown below over a longer span of trades from the same market system. The bar chart, below the equity curve, illustrates how the number of contracts increases with increasing profits.



Equity curve and number of contracts in an example of fixed ratio position sizing.

Because the number of contracts always starts at one, the fixed ratio method usually produces better results for smaller accounts. For larger accounts, it may take an unreasonable amount of time to increase the number of contracts to a level that takes full advantage of the available equity.
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I don't know why you insist on quoting Hershy persistently.I have him and his 'those i control' cohorts on ignore.Some of what you post is interesting and I don't want to have to add you to the list.
 
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