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A "hardcore" mathematics question

  • #61
  • Edited 7:39am Apr 4, 2010 5:41am | Edited 7:39am
Thanks for all who have contributed to the work here. This work will help me to build up my overall money management strategy.
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  • #62
  • Apr 4, 2010 6:36am Apr 4, 2010 6:36am
Yesterday I installed a risk analysis tool for Excel, and this was the first issue I implemented. After many many iterations, I can confirm ForexQuant and kk007's answer.
The nail that sticks out gets hammered back in
  • #63
  • Apr 4, 2010 12:23pm Apr 4, 2010 12:23pm
Quoting kk007
Thanks for all who have contributed to the work here. This work will help me to build up my overall money management strategy.
I just wonder how you can apply the method into money management strategy because the RRR hardly equal to one in real application. Pls enlighten me if you dont mind.
  • #64
  • Apr 4, 2010 9:24pm Apr 4, 2010 9:24pm
Quoting ForexQuant
I just wonder how you can apply the method into money management strategy because the RRR hardly equal to one in real application. Pls enlighten me if you dont mind.
The drawdown prob. can be calculated using the same method for different fixed RRR I think. Nevertheless, the result can only be used as an reference, since nothing can be fixed in actual trading and success prob. for each trial is not known precisely.
  • #65
  • Apr 4, 2010 10:41pm Apr 4, 2010 10:41pm
Quoting Craig
The question is ambiguous, do you mean...

1) Having a draw down of size 10 during the 30 trials (10 consecutive losses).
2) Having a total of 10 losses during 30 trials.
3) Having his capital go lower than -10 during 30 trails.

Regardless of which it is, here (http://mathworld.wolfram.com/RandomW...mensional.html) is probably a good start.
First, we would need to know the desired confidence level. If desired confindence was 99%, then:

n= log(1-.99) / log(1-.000105)= 43,856

it would take 43,856 tades for him to be 99% confident that he would hit a string of 10 losers in a row (at .4 prob of loss). No way to know if he would start that string on trade #1 or trade # 30,000 or trade # whatever. I am not sure that is what he is asking.... the question was a little unclear. Also very theoretical, because he does not have a system that can produce a win rate of 60 % over that number of trades. But neither does anyone else.

If the question is 'the odds of going bust in just 30 trades'.... go over to the wizard of odds website. There is a calculator page, and one of them...if I remember right... calculates the probablities of going bust given various win rates. The site is for roulette and blackjack, but it will work for this question as well.

Hope this helps.

Regards,
  • #66
  • Last Post: Apr 4, 2010 11:20pm Apr 4, 2010 11:20pm
A few of people here finally understand the question. And the question has already been solved and confirmed. If you are not clear yet, read the whole thread. You are answering a different question.

Quoting FX-Petra
First, we would need to know the desired confidence level. If desired confindence was 99%, then:

n= log(1-.99) / log(1-.000105)= 43,856

it would take 43,856 tades for him to be 99% confident that he would hit a string of 10 losers in a row (at .4 prob of loss). No way to know if he would start that string on trade #1 or trade # 30,000 or trade # whatever. I am not sure that is what he is asking.... the question was a little unclear. Also very theoretical, because he does not have a system that can produce a win rate of 60 % over that number...
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