kelly formula

Discussion in 'Professional Trading' started by wonderworld, Jul 21, 2006.

  1. Any thoughts on the "kelly formula" or a better money management system? I know this topic has been discussed before but maybe some new traders on the forum that are using it and want to share their thoughts.

    What is a good book to learn how to put this formula to use? Or a different formula.
  2. These books will help.....

    Fortune's Formula
    Beat the Dealer
  3. Thanks Mrs Savant those are some good websites. I was watching a promo video for TraderStuido and they had some interesting points on why just kelly criterion and Optimal F I believe are slightly flawed for trading. It has to do with the amount won not being constant as it is gambling.
  4. It seems to me that the market has no idea if you are winning or losing. So why would these distribution formula's work?

    If you have an edge it is much better to identify "why" and get out of the number of winning strings mode...

    Get more "in tune" with the market and take everything it wants to give you. Get out of "your condition" mode.

    Call it womens intuition....
  5. There has been other discussions on the kelly formula here. The conclusion is in general, risk 1/6 the kelly ratio for your system, for the reason that expectancy one week or month can be totally different than it was a month before. i.e a long-only system might have a win rate of 30% and expectancy of .3 in this environment, while in february, its win rate is 60% and expectancy of 2.