Hi, Thumb up for the trades Kelly's formula doesn't work if the outcome isn't "win X or lose Y". The generalized version is a little bit more complicated. It becomes a high degree polynomial to solve. If you have the values in pips I may ...

Calculating the most effective trade size

Hi Dagobert, Keep in mind all of this is highly theoritical because I didn't take spread, minimum tradable lot size or margin requirement into account. As Redlion said you will have variations in the performances of your system. As long as you only ...

Calculating the most effective trade size

Sure but put things in perspective. We are talking 80% DD on... a hundred bucks. Nothing harmful. Like people scratching a lotery card every week... --At least that's the way I understood the OP's question-- This said, if he really has got a 70% ...

Calculating the most effective trade size

Hi Dagobert, If I understand correctly the questions are about gamble-trading à la James Dean, "Grow fast, lose quick and leave a good looking blown account..." Question 1: Don't confuse optimal and maximal. Optimal means the best according to some ...

Calculating the most effective trade size

Hi Supertrader9! According to Kelly's formula the maximum risk is 20%. This huge value comes with a very high risk of ruin... After 5 losses the DD is almost 70% which is a crazy high risk in regard of the reward after 5 winners: only x2.49 with a ...

Trading Game System Discussion

Very honestly, should I be able to move the market to grab a high number of lots for a discounted price, I would do it with no hesitation! That's just part of the game to assess this risk as a retail trader. You can see clearly on the charts where ...

Trading Game System Discussion

Erratum — Oops my bad. That's wrong!! I was thinking in term of %frac MM... or just was tired. The risk keeps being 120 since 4x30 may be lost. The reward reduces with each attempt since we must cover the potentially accumulated losses. The ...

Trading Game System Discussion

Hi Marcmarc, That's quite hard to expose ideas on a forum, especially when it's not in your mother language... Let me try to develop. First of all sorry huge post ahead. And not a single picture I'm trying to know if one can improve a strategy by ...

Trading Game System Discussion

I didn't say the expectancy cannot be more than 1. I said "The win/loss ratio w is a probability, therefore it is bound to be less than 1." I don't quite understand the sentence "I have backtest several optimized strategy, found that scalping ...

Trading Game System Discussion

This thread starts being very interesting — Hi. I've a quite opposite point of view . The expectancy of a system, in its simplifed version, is E = w(R+1) - 1. The win/loss ratio w is a probability, therefore it is bound to be less than 1. ...

Trading Game System Discussion

By whom? RR is what the system yields in average not what you want it to produce. --You cannot ask the market 90 pips just because you want 3:1 and your SL is 30-- Let's take Thomas Demark's breakout strategy as an example. He noticed that, after ...

Trading Game System Discussion

I may misunderstand your post but I'm afraid you're mix and matching two different things. The R:R is a component of the expectancy of a system. That's nothing to do with MM. MM just multiplies the gains and the losses. MM tries to optimize the ...

Trading Game System Discussion

Actually no. You need to sell at a higher price than you buy. Regardless of the path the price follows to reach the TP. As long of course as the path doesn't cross SL first.

The Illusion of Motion

motion is useless for trading — True that matter is mainly made of void. The distance between an atom and its first eletron is huge in comparison to its size and the distance to the next atom in a molecule is even more bigger. To set ideas, if ...

The Illusion of Motion

Diogenes stood up and walked — Zeno like all ancient Greeks had no idea of infinite calculus. Riemann proved the convergence of the serie 1/2+1/4+1/8+1/16+... it equals 1. The arrows goes to the target, Achilles catches up the turtle, market ...

The Illusion of Motion

Take it as an investor would.... — Hello, Since that's a commercial EA, I guess you can't know what it does and how it does it. Let's consider this black box is a tiny fund management company; you are their only client... If possible graph ...

the big brother running to help you :)

Actually this was a joke to underline a paradox: How can you open a new position if you are already at your maximum DD? Per definition of "maximum" you cannot go any beyond ;-). Yet if you don't open a new trade how can you recover? => In short ...

Kelly Criterion - Optimizing risk

A couple links — Hi Jairo I was also interested in the likelihood of a given drawdown using Kelly. I couldn't find anything... But you may be interested in these two links. This first one explains the generalization of the formula for several ...

Kelly Criterion - Optimizing risk

Thanks for the "average reader" but one order of magnitude just changes absolutely everything! You cannot generalize from ten to one hundred. You started this thread to change people beliefs about 1:1 RRR but refuse these other people to challenge ...

1:1 Risk Reward Ratio - Why it just makes sense

That's just maths — Some "systems" (I hate this term) rely on a 1:1 RR. See Tom Demark's break-out system is a good example because profitable --at least for him--. The TP is predefined by the projection of the opposite swing through the ...

1:1 Risk Reward Ratio - Why it just makes sense