looking to build aggressive MM strategy

Quoting 30XTCi

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After Thousands of hours working on a program in Excel, I came to the conclusion that in order to crack this Forex wide open I had to change one thing. My lousy conservative Money Management.

We all know about MM. or at least we should. If you'r a newbie don't read past this Point! Go read what you should do (according to everybody that ever lived).

What I need is someone who has ( or can design) the most aggressive, crazy, absolutely insane MM program the world has ever seen!

Think about it like this:

If I told you (guaranteed you) that the next 95 out of 100 trades that you take would return some kind of profit, would that change your MM stategy that you use today, Just a tad, a lot, or completely?

Looking forward to you reply and thanks in advance.

This could be fun.

(Let the flames begin)

Roy.

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Quoting merlin

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thousands of hours? it takes less than 100 hours to read all three of Ralph Vince's books and Fred Gehms as well they beat the subject to a dead pulp, id be incredibly impressed to see someone on here build an MM strategy with more sophisticated math than presented in these books. me, i dont get fancy anymore, a standard %R i have found to work best (after going in a few large circles).

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Quoting NipthePips

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Umm lest see


Trade 40% of your account, and adjust your trade size depdning on your account size


so if you have a 1k account..trade 400 dollars (or 4 mini lots)

lets say you get 100 pips off of that trade you now have 1400 dollars, now on your next trade trade 560 dollars (or 5.6 mini lots) and keep adjusting like that. If you loose money, trade less..always keep it at 40%


Thats pretty agressive..i usually go for 10-20 pips a trade if i trade that MM plan. But you have to have a good feel of the market if you are going to try to use it..especially everyday

Some people call it gambling..i call it trading with some balls...the whole darn thing is random and a risk anyways

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Quoting jkmack

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The Kelly Criterion or The Kelly Formula offers the ability to determine the most aggressive money management without sacrificing all sense of reason.

http://home.williampoundstone.net/Kelly.htm

The quick rule of thumb being edge/odds, the edge being how much you expect to win. So if your aim is 20 pips and your systems has proven that it can attain that 20 pips, 80% of the time, you would divide 20 by 80 for .25, 25% of your capital should be used on any one bet to achieve optimal compounding without risking total ruin.

Unfortunately, this does not take into account individual human psychology. This system will produce severe drawdowns, even if your system performs as expected and provides 20 pips, 80% of the time, you would still see drawdowns surpassing 50%, this could cause many to throw in the towel and stop the process, thereby negating thier original intent of maximizing thier gains.

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Quoting 30XTCi

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I am not a gambler, I'm an Investor. That's why I spent so much time in the " Garage" looking for the right tools to do this. I have been a tradesman all my life and you need the right one for a particular job.

40% to start the first trade may work, then scale in every 20 pips .

I never could understand why someone with $1000 in an account would use $20 and let the rest have a holiday!

Thanks for your input

Roy

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Quoting jkmack

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The Kelly Criterion or The Kelly Formula offers the ability to determine the most aggressive money management without sacrificing all sense of reason.

http://home.williampoundstone.net/Kelly.htm

The quick rule of thumb being edge/odds, the edge being how much you expect to win. So if your aim is 20 pips and your systems has proven that it can attain that 20 pips, 80% of the time, you would divide 20 by 80 for .25, 25% of your capital should be used on any one bet to achieve optimal compounding without risking total ruin.

Unfortunately, this does not take into account individual human psychology. This system will produce severe drawdowns, even if your system performs as expected and provides 20 pips, 80% of the time, you would still see drawdowns surpassing 50%, this could cause many to throw in the towel and stop the process, thereby negating thier original intent of maximizing thier gains.

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Quoting mrmikal

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Interesting point you're trying to make...undoubtedly the "use $20 of $1000" is the 2% risk, but 2% risk doesn't necessarily mean that you're only "investing" $20 of $1,000...it means that you're only willing to LOSE $20 for every $1,000.

From an investor's stand point, that's about as safe as you can get.

However, you could always "invest" $500 of your $1,000 for 1 lot of the USD/JPY at 200:1 leverage and as long as you don't lose more than about 3 pips, you'd still be fine...It's all about perspective.

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Quoting jkmack

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The Kelly Criterion or The Kelly Formula offers the ability to determine the most aggressive money management without sacrificing all sense of reason.

http://home.williampoundstone.net/Kelly.htm

The quick rule of thumb being edge/odds, the edge being how much you expect to win. So if your aim is 20 pips and your systems has proven that it can attain that 20 pips, 80% of the time, you would divide 20 by 80 for .25, 25% of your capital should be used on any one bet to achieve optimal compounding without risking total ruin.

Unfortunately, this does not take into account individual human psychology. This system will produce severe drawdowns, even if your system performs as expected and provides 20 pips, 80% of the time, you would still see drawdowns surpassing 50%, this could cause many to throw in the towel and stop the process, thereby negating thier original intent of maximizing thier gains.

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Quoting linuxtroll

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The Ultimate Chance

LoL :o)

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Quoting Puppy

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Hello jkmack,

I think your "rule of thumb" calculation is a bit "STRANGE".
From your example formula. Say if I aim 20PIPs and the system has proven that it is winning 90% of time, then I should invest 22% of capital. Say if it is winning 10% of the time, then I should invest 200% of capital.

Hope you don't use your rule of thumb formula for your trading~~~

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Quoting Puppy

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Another example, 50:1 leverage, 20PIPS win, 20PIPs stoploss, correct 60% of time
Edge: (20*0.6-20*0.4)/200=0.02
Odd: 20/20=1
Edge/odd = 0.02


Hope that helps

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Quoting jkmack

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The Kelly Criterion or The Kelly Formula offers the ability to determine the most aggressive money management without sacrificing all sense of reason.

http://home.williampoundstone.net/Kelly.htm

The quick rule of thumb being edge/odds, the edge being how much you expect to win. So if your aim is 20 pips and your systems has proven that it can attain that 20 pips, 80% of the time, you would divide 20 by 80 for .25, 25% of your capital should be used on any one bet to achieve optimal compounding without risking total ruin.

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Quoting dottore

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Hi, folks let me add my 2 cents.

The Kelly formula doesn’t apply to forex as the probability in a series of events varies. However I worked on that problem (wwhich VAR maximizes equity curve) some time ago and I believe i found a solution. Here is the simplest version of it:

Definitions:

VAR – value at risk means % of total capital risked in a single trade.
X(n) – outcome of a n-th trade in pips (spread included).
SL – stop loss
C(n) – capital after n-th trade

Key formula:

C(n) = C(n-1) * [1 + [X(n)/SL] * VAR]

It means that your capital in the next trade depends on two factors:

X(n)/SL – I call it market leverage – informs how much you increased VAR
VAR itself.

Put all your trades in Excel and apply this formula using various VAR (suggested: from 0,02, step 0,02 to 0,30)

You will receive a some kind of a bell curve with a clear maximum (for example let it be 0,20) (actual maximums almost always amazes me)

Divide the distance to maximum into four equal parts.

A [0-0,05], B [0,06-0,10], C [0,11-0,15], D [0,16-0,2]

VAR strategies:

A – conservative.

B – semi aggressive,

C – aggressive.

D – forbidden )))

C and D maximize equity curve.

Real data are better than backtests, that’s obvious. Minimal amount of trades = 100. Formula above is great for EA.

Of course SL and VAR could vary with n and the problem becomes nontrivial - we are trying to find a maximum of a scalar function on multidimensional manifold. Some time ago I planned to launch a separate thread on this, if you wish I'll do so, with examples and answers. I dropped the idea mainly because English is not my first language and i'm still having fundamental problems with it. But if you bear this I'll do it.

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Quoting 30XTCi

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Damm, you people are good!
dottore,
Now we are getting somewhere.

I stayed with you just about all the way until we hit the manifold, the only manifold I've ever heard of is underneath my car!

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