Traders' Roundtable

Hey guys,

I've been miquoted twice now, and it makes
what I wrote sound like a contradiction:

MISQUOTE: It just so happens that "N" is used both to size positions, and to place stops. Neither has an impact on how positions are sized.
Stop in N can be changed from 2.0 to 4.0, or even 8.0, with ...

You said, "even with no stop." How do you plan to size your positions? ...You see after all you’re stops matter;
the size of your position depends on the stop ‘you’ pick.
Hi Menelik,

I believe you've hit on a common misconception, which is that "position sizing depends on the stop you pick ...

I have vivid memories of my childhood violin teacher's instructions.

"Every time you play a passage wrong," he would say, "you have to play
it right 10 times to unlearn the mistake." His advise on learning a piece
of music was for the student to listen to a good recording of it over and
over ...

Before I start digging around, you wouldn't happen to know
where I could get examples of code (any language but Basic would
be good) for writing my own Span calculation modules, would you?
Hi Vince,

I'm not aware of any code out in the public domain, but I haven't done a
thorough search.

Can ...

Standard Portfolio Analysis of Risk ("SPAN") was developed by the Chicago Mercantile Exchange in
1988 for calculating customer margin requirements, and has become the futures industry standard. 1,2
SPAN is CFTC approved, and is currently used by more than 30 exchanges and clearing
organizations ...

Hi enigma,

Much of academic finance deals with portfolios of assets that are bought and held, or the selection
of securities that may comprise an asset class; managed futures would typically be represented as
a single asset stream that is held as part of a larger portfolio.

Studying the bet ...

Warren Buffett reels off a good, pertinent quip at the recent stockholder's meeting:

Buffett: "A few mistakes that are correlated will overcome a lifetime of
savings: you will make a few cents on the dollar when you're right, but you'll
lose incredible sums if you're wrong.... There's nothing as ...

It was my wife who said: "You can't spend all your time testing systems. You have to start trading
once and collect some experience." She said also: "You are always trying to be safe. With your testing
of systems you are trying to avoid risk and to be on the safe side". She made me think...
Dear ...

Hi Forum Mgmnt,

Do you mind taking a minute to specifically address the issue of survivorship bias?

When testing a momentum strategy, for instance, I can't help thinking that the absence of (now delisted)
companies such as Netscape, and Ascend, just to name two, could have a significant impact on ...

Hi Toby,

I think we've all experienced the same level of frustration at one time or another, so don't sit
around and beat yourself up over it! But do take the time to absorb and seriously contemplate
what Sir G and Kiwi were kind enough to offer; namely, good advice and good food for thought.

It ...

How about the scorpion as a model of robustness adaptability? They've
been around for a while, too.

In fact, a rancher friend recently told me that scorpions and cockroaches
rarely inhabit the same locale because (beside having diametrically
opposed climatic preferences), scorpions will dine on ...

There are some enormous moves in nearly all markets...With a very big picture mindset,
I can see great potential for strategic position accumulation over a very long period of time...
There are whales to be ridden.

I am pretty sure the idea of chasing these VLT moves can easily be dismissed by ...

Great post, yp. Thanks.

There was an excellent section on actuarial versus subjective decision making in James P. O’Shaughnessy’s What Works on Wall Street. The 2nd chapter, entitled “The Unreliable Experts: Getting in the Way of Outstanding Performance,â€

[quote]I believe that if we have desires beyond where we currently are… that we aren’t where we want to be, we have somehow limited ourselves.
In your minds eye, think of ... whoever it is that you “believeâ€

"Unfortunately, Yahoo!, a primary news source for many people on the Internet, reprints some Weekly World News..[but]...doesn't convey a strong 'bogus' warning to readers who don't notice the original source is the Weekly World News"

http://66.165.133.65/humor/iftrue/insider.htm

Thanks, SirG.

That's Samurai Trader's Maxim Number One from Zen in the Markets, by Edward Allen Toppel. I should have attributed it earlier.

Excellent book, by the way. It got bylines by Milton Friedman, Jack Sander, and Leo Melamed.

- Howard

Yes - TR calculates MAR as CAGR / MaxDD, and as yp said, it uses the closed daily MaxDD of total equity.

I read somewhere recently that hedge fund rating agencies typically use end-of-month data points to calculate MaxDD, whereas CTAs are subject to MaxDD scrutiny on a daily time-frame. Can anyone ...

Is market psychology important only when you are not trading a mechanical system? Doesn't a system take the psychology part out of it?
George,

There are a number of psychological factors which shape any investment decision-making process, many of which can exert an influence even in the design ...

I’m curious to find out if anyone has had success employing the concept of Maximum Adverse Excursion. My understanding of the concept is that it is a practical application of the adage that, "The best trades never go very far against you."

The literature I saw on the matter some time ago implied ...

Several of my preferred systems seem to perform better and better (higher and higer reward/risk ratio) as I increase heat, using a constant-percent-risk betsize protocol. Unfortunately the drawdowns get bigger than I can psychologically stand.
That's an interesting observation, and one of the few ...