Position sizing

[HolyGrail]

Quote from ElectricSavant:

HolyGrail you are just wrong here.

Try to open your mind and imagine how....


Leverage is leverage, PERIOD. If you trade with leverage consistently you are taking on more risk PERIOD.

Please enlighten me. If you trade with more money than you have in your account you are risking more money than you could have risked if you traded within the boundaries of your account. That sure looks like more risk to me.

 

[ElectricSavant]

anti-correlation

Quote from HolyGrail:

Please enlighten me. If you trade with more money than you have in your account you are risking more money than you could have risked if you traded within the boundaries of your account. That sure looks like more risk to me.

 

[HolyGrail]

Quote from ElectricSavant:

anti-correlation

Thank you. I will read up on that right now. Sounds like gobly-gook to me, but I do have an open mind.l I always thought there was correlation or no correlation. I've never heard of anti-correlation, but I certainly will read up on it.

 

[ElectricSavant]

It is when one position goes up the other one goes down with a measurable percent of efficiency.

correlation would mean moving together
non correlation would mean no relation to each other

Michael B.

Quote from HolyGrail:

Thank you. I will read up on that right now. Sounds like gobly-gook to me, but I do have an open mind.l I always thought there was correlation or no correlation. I've never heard of anti-correlation, but I certainly will read up on it.

 

[ElectricSavant]

HolyGrail,

I can also tell you how to remove risk from leverage.

I have won many root beers for this.

 

[psytrade]

isnt inverse more suitable than anticorrelated?

 

[ElectricSavant]

ok...I can go along with that. Now that were all on the same page..what kind of car do you drive? and err...what is your "position" size?

Quote from psytrade:

isnt inverse more suitable than anticorrelated?

 

[HolyGrail]

Quote from ElectricSavant:

HolyGrail,

I can also tell you how to remove risk from leverage.

I have won many root beers for this.

Well I can see if you trade two instruments that are inversely correllated you will reduce your risk, but at the same time wouldn't that reduce your profits as well?

 

[psytrade]

ive never come across an edge where you could vary position size based on the probability of a signal, though im sure you could vary it if the position wasnt correlated to the other one.

so what sort of anomaly could you trade off making money on two positions in one market, with the same risk? something mean reverting i guess. say a collapse of volatility or an increase of volatility. but unless you have a guaranteed signal, there is no way in my mind to limit market risk the way you suggest. at least in the long-term. if you are trading discretely, one trade long, followed by and exit followed by a short in a pattern, i suppose that risk could be seen as not the same as an outright long or short position. it would behave like an option, with the minimal cost being slippage and commission, and borrowing charge. the downside risk would be controlled.

definitely a real dream of an algorithm if such one is out there.

 

[ElectricSavant]

Well if you measure yield against risk no...its according to how you think?

See... I am proving on how much I agree with you.

But this ego measurement stuff needs to go.

Quote from HolyGrail:

Well I can see if you trade two instruments that are inversely correllated you will reduce your risk, but at the same time wouldn't that reduce your profits as well?