p.s. not even Taleb can truly define his risk. Theoretically we could go through an anti black swan period where markets are so flat that he runs through all his capital. We don't have to be as stupid as Niederhoffer, but we do have to face the risk of ruin just like we do in life.
Ah, I overlooked this post earlier. Your caveat 'most of the time' completely makes my case for me. Would you want to jump out of a plane each day with a parachute that opened 'most of the time'? That doesn't cut it when you are talking about risk of ruin, which is why Optimal F is a subpar strategy (unless you can afford to blow off the loss of your capital base). As for Niederhoffer, he lost 70 million bucks in one day back in the asian currency crisis and then got toasted again with the same type of strategy on 9/11. Fool me once, shame on me. Fool me twice, shame on you. His investors must be very forgiving folk. He is a walking talking posterchild for why open risk cannot be quantified. u have great weekend also p.s. Faster: you are the greatest. come on over and have a beer sometime
The idea of optimal f assumes - I'd say misguidedly - that we all want to maximize our upside. Anyone who trades for a living will tell you that's BS, you first need to take care of the downside. Vince says that regardless of whether we like it or not, the maximum potential of our trading system/style lies somewhere within the "f" landscape, and that there is an optimal number for this "f" which will yield the maximum results. Again, I say, it's misguided.
Before wasting your time and energy trying to explain this to Chasin I suggest you have a look at this thread; http://www.elitetrader.com/vb/showthread.php?s=&threadid=5884&perpage=6&pagenumber=13 PEACE and good trading, Commisso
once you know your optimal f, you don't have to use 100% of it. i've read that, as a trader, it is wise to only use a percentage of optimal f.
I have been trying to come up with a money management system and this is the perfect thread to post. Dark, maybe you can shed a little light on this question. I am a prop trader who thinks more in terms of share size rather than dollars....as I am not trading my own capital. I have been gradually increasing my share size. I am currently trading 1000 shares as my set default. I am an intraday trader who does not feel comfortable holding overnights as of yet so my time frame can be from minutes to hours. Daytrading is a losing prob. game so I have to keep my losses small and make my wins larger. There is obviously a flaw in my position size staying at the same share size each trade. Management has not mentioned a word about position size, money management, much less any training so as I am self taught and learning. If any of you have ever read the "phantom of the pits" article, he states that you must ,with out exception, add to your winners (providing the conditions call for it) and keep losses to a minimum. But with intra-day trading, he states that usually the best time to add is right off the bat (again, providing the conditions are right). So here is my question: Should I reduce my share size to 500 shares per trade and doubling up to 1000 shares per trade only when the conditions are right? I am not comfortable just yet to take on 2000 shares and keeping my default 1000. Am I correct in this line of thinking? Any help would be appreciated.