Quoting BemacDislikedHi Phil,
Now it has a + expectancy.
I don't have Mr. Jones' book. If there is a breife explanation that you could post I would appreciate that.Ignored
The main characteristics of antimartingale methods are that is causes geometric growth during positive runs and suffers from what is called asymmetrical leverage during drawdowns. Asymetrical leverage simply states tht as an account suffers losses, the ability to make up those losses decreases. If a 20% drawdown is suffered, a 25% gain is required to get back to even. A 10% drawdown requires a 11.11% gain to get back to even. The forumula for this is:
[1/(1-%loss)] -1 = Required % gain
In many cases, asymmetical leverage does not affect trading. For example, ifa trader trading the absolute minimum available in the bond market suffered a 20% drawdown, the requjired gain would still be 25% of the new account balance, but the ability to acheive the extra 5% has not diminished. This occurs because even though the percentage required to recoup the precentage loss of hte account increases, the amount of capital to recoup the amount of captial lost remains the same. Therefore, asymmetrical leverage does not play a role in the performance of the account. [This concept applies to your spreadsheet]
On the other hand, it plays a huge role when traders apply certain money managment techniques. For example, if a trader decides to trade one contract for every $10,000 in the account, then a single contract would be traded from $10,000 through $19,999. At $20,000, contracts would increase from one to two. Suppose that the very first trade after increasing to two contracts is a loser for $1000. Since there were two contracts on this trade, the actual loss comes to $2000 and the account goes back to $18,000. According to the money management rules a single contract has to be traded once again. The trader must now incur two, $1000 winning trades to get the account back to where it was just prior to suffering a $1000 loss with two contracts. Here, the amount of capital required to bring the account back to even remains the same, but the ability to achieve that amount has decreased by 50%. That is asymmetrical leverage and it can be detrimental.
I hope this helps explain my point. There is nothing wrong with your spreadsheet but it does not account for variations in wins and losses, uneven distributions of wins and losses, the sequence of wins and losses nor the affects of asymmetrical leverage. Earlier in this thread I posted to equity curves of the same system. From them you can see that they both employed a 3% fixed ratio money management technique. Due to the reasons discussed above, one looked great, and one when bust.
Phil
PS Sorry about the spelling...I tried to type while reading and not looking at the keys.