New thesis: Money Management Principles for Mechanical Traders

Discussion in 'Risk Management' started by sd23, Dec 11, 2012.

  1. sd23


    I have written a thesis that explains the mathematics behind Ralph Vince's concepts of the "optimal f" and "leverage space trading model." It also provides practical examples involving trading systems operating on futures markets.

    I include the details below. Perhaps some of you will find this interesting.

    (Posted with a prior permission from Elite Trader Support.)

    Shlok Datye
    Stockholm, Sweden


    Money Management Principles for Mechanical Traders
    Shlok Datye
    Master's thesis in mathematical statistics
    Master's program in mathematics
    Royal Institute of Technology
    Stockholm, Sweden
    November 2012


    In his five books during 1990-2009, starting with Portfolio Management Formulas, Ralph Vince made accessible to mechanical traders with limited background in mathematics various important concepts in the field of money management. During this process, he coined and popularized the terms "optimal f" and "leverage space trading model."

    This thesis provides a sound mathematical understanding of these concepts, and adds various extensions and insights of its own. It also provides practical examples of how mechanical traders can use these concepts to their advantage. Although beneficial to all mechanical traders, the examples involve trading futures contracts, and practical details such as the back-adjustment of futures prices are provided along the way.

    Download (PDF):
    Companion website:
    Official university link:
    kut2k2 likes this.
  2. vikana

    vikana Moderator

    thank you. That looks nicely done.
  3. back adjusted prices are a requirement for market systems development and design.

    I hope you are familiar with the rollover process provided in the TN selection of data information supplies. Look at their data supply numbering series for the differentiation.

    I missed the limit down/limitup "effects". (Part of figure 21??)