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Spydertrader's Jack Hershey Equities Journal II
- Thread starter Spydertrader
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Mischief,
Thanks for posting an explanation of your methodology. I've been using Amibroker to e-mail me alerts when stocks break out using MedVed QT and Ameritrade as the quote server. I've been somewhat successful, but I've been very busy at work lately so I haven't gotten too far in my latest papertrade experiment.
I was looking over your spreadsheet and noticed that you were booking some trades simultaneously when you should have been out of money (even margin). For instance on 2/21 you posted a total dollar amount of $12,319 when your account value was only $5866 from the line before 2/21.
You will get misleading results this way regarding how much you account will grow. Its OK to book all the trades for collecting statistics on the methodology, but I'd try make sure you take a look at limiting the "streams of money" as Jack calls them to what your actual account can afford. That will give you a better idea of how a real account will perform.
I would'nt mind looking over your code. I'll post mine up here later tonight if I get the chance.
-ace
Thanks for posting an explanation of your methodology. I've been using Amibroker to e-mail me alerts when stocks break out using MedVed QT and Ameritrade as the quote server. I've been somewhat successful, but I've been very busy at work lately so I haven't gotten too far in my latest papertrade experiment.
I was looking over your spreadsheet and noticed that you were booking some trades simultaneously when you should have been out of money (even margin). For instance on 2/21 you posted a total dollar amount of $12,319 when your account value was only $5866 from the line before 2/21.
You will get misleading results this way regarding how much you account will grow. Its OK to book all the trades for collecting statistics on the methodology, but I'd try make sure you take a look at limiting the "streams of money" as Jack calls them to what your actual account can afford. That will give you a better idea of how a real account will perform.
I would'nt mind looking over your code. I'll post mine up here later tonight if I get the chance.
-ace
Hi Ace,
Thanks for the feedback. I agree regarding the dollar amounts and was using the spreadsheet to track individual trades.
I'll clean up and comment the code before posting. I had two trades trigger last night, GROW and BTUI. I got an auto fill on BTUI, but for some reason GROW didn't fire. I need to have a look and work out why.
As you are probably aware I only require 25% margin with IB and so can leverage up. As long as I calculate my 2% portfolio risk on the 5k and not the 20k, I won't exceed my risk parameters.
Van Tharp has some good ideas on money management, particularly around portfolio heat. He also recommended using the 80% of the Kelly Formula as a total portfolio risk. My preliminary analysis shows that I run out of margin well before I reach that figure. If I get to 3%+ portfolio risk per trade, my positions get way too large.
Thanks for the feedback. I agree regarding the dollar amounts and was using the spreadsheet to track individual trades.
I'll clean up and comment the code before posting. I had two trades trigger last night, GROW and BTUI. I got an auto fill on BTUI, but for some reason GROW didn't fire. I need to have a look and work out why.
As you are probably aware I only require 25% margin with IB and so can leverage up. As long as I calculate my 2% portfolio risk on the 5k and not the 20k, I won't exceed my risk parameters.
Van Tharp has some good ideas on money management, particularly around portfolio heat. He also recommended using the 80% of the Kelly Formula as a total portfolio risk. My preliminary analysis shows that I run out of margin well before I reach that figure. If I get to 3%+ portfolio risk per trade, my positions get way too large.
I was not aware that Van Tharp recommends 80% of Kelly. It seems way to aggressive. I think that 20% is much more appropriate. Where did you get your number from?
Quote from mischief:
Hi Ace,
Thanks for the feedback. I agree regarding the dollar amounts and was using the spreadsheet to track individual trades.
I'll clean up and comment the code before posting. I had two trades trigger last night, GROW and BTUI. I got an auto fill on BTUI, but for some reason GROW didn't fire. I need to have a look and work out why.
As you are probably aware I only require 25% margin with IB and so can leverage up. As long as I calculate my 2% portfolio risk on the 5k and not the 20k, I won't exceed my risk parameters.
Van Tharp has some good ideas on money management, particularly around portfolio heat. He also recommended using the 80% of the Kelly Formula as a total portfolio risk. My preliminary analysis shows that I run out of margin well before I reach that figure. If I get to 3%+ portfolio risk per trade, my positions get way too large.
From the Money Management Report. The 80% figure is the TOTAL portfolio risk, not for an individual trade. Text from the relevant section is pasted below.
"..However, if you have a system that is right 50% of the time, you can easily be wrong 10 or even 20 times in a row during a large number of trials. Thus, you could never risk 25% of your remaining equity - unless you like the kind of drawdowns show in Table 4 at the 2530% level.
The Kelly Criterion can still be useful for people wanting to go for optimal rates of return. Simply take about 80% of the Kelly Criterion - in this case 80% of 25% is equal to 20%. Figure out how many trades you are likely to have on at one time and then divide your 80%-Kelly value by that number of trades. For example, if you are likely to have on as many as 10 trades at one time, then your optimal risk size would probably be about 2% using this system."
"..However, if you have a system that is right 50% of the time, you can easily be wrong 10 or even 20 times in a row during a large number of trials. Thus, you could never risk 25% of your remaining equity - unless you like the kind of drawdowns show in Table 4 at the 2530% level.
The Kelly Criterion can still be useful for people wanting to go for optimal rates of return. Simply take about 80% of the Kelly Criterion - in this case 80% of 25% is equal to 20%. Figure out how many trades you are likely to have on at one time and then divide your 80%-Kelly value by that number of trades. For example, if you are likely to have on as many as 10 trades at one time, then your optimal risk size would probably be about 2% using this system."
mischief,
Here's the code I promised.
I haven't messed with the science of money management - more complicated forms of money management - other than position sizing based on stop risk and total portfolio. Thanks for the tip.
Maybe its time for me to look into Van Tharpe's book to flesh out the rest of trading plan.
-ace
Here's the code I promised.
I haven't messed with the science of money management - more complicated forms of money management - other than position sizing based on stop risk and total portfolio. Thanks for the tip.
Maybe its time for me to look into Van Tharpe's book to flesh out the rest of trading plan.
-ace
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For me 80% of Kelly, even over 10 positions, is too high. High percentages of Kelly come with nice returns, but high probability of large drawdowns too (and this is even more unpleasant for trend following systems because they have small winning rates).
Quote from mischief:
From the Money Management Report. The 80% figure is the TOTAL portfolio risk, not for an individual trade. Text from the relevant section is pasted below.
"..However, if you have a system that is right 50% of the time, you can easily be wrong 10 or even 20 times in a row during a large number of trials. Thus, you could never risk 25% of your remaining equity - unless you like the kind of drawdowns show in Table 4 at the 2530% level.
The Kelly Criterion can still be useful for people wanting to go for optimal rates of return. Simply take about 80% of the Kelly Criterion - in this case 80% of 25% is equal to 20%. Figure out how many trades you are likely to have on at one time and then divide your 80%-Kelly value by that number of trades. For example, if you are likely to have on as many as 10 trades at one time, then your optimal risk size would probably be about 2% using this system."
Ace, Thanks for that. Here's mine. I've added a few comments, etc. and removed some redundant lines.
cnms2, I tend to agree. However, if there was a system to get more aggressive on, based on old data, this would be getting towards it. From memory, Spyder's Journal 1 had a > 70% win rate with an avg. win > avg. loss. My month of 'hand backtesting', had a 65% win ratio with similar win/loss figures. The holding periods are also quite short, so there is plenty of opportunity to recover drawdown. From memory, Van Tharp spoke about systems that trade more frequently have smaller drawdowns because of the greater ability to recover the losses. This of course assumes that the underlying system figures are good.
In any event, I'd need at least 6 months of my own real (not paper) trading to really push it hard and I think I'd run out of equity well before we started nudging the Kelly figures.
cnms2, I tend to agree. However, if there was a system to get more aggressive on, based on old data, this would be getting towards it. From memory, Spyder's Journal 1 had a > 70% win rate with an avg. win > avg. loss. My month of 'hand backtesting', had a 65% win ratio with similar win/loss figures. The holding periods are also quite short, so there is plenty of opportunity to recover drawdown. From memory, Van Tharp spoke about systems that trade more frequently have smaller drawdowns because of the greater ability to recover the losses. This of course assumes that the underlying system figures are good.
In any event, I'd need at least 6 months of my own real (not paper) trading to really push it hard and I think I'd run out of equity well before we started nudging the Kelly figures.
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