can't believe this method have become so popular in just few days.
The Pouria Method 562 replies
Lessons Learned during System Development 29 replies
(pouria method II on the test) 218 replies
System Development Secrets 5 replies
Metatrader 4 Development Course 3 replies
DislikedI always have a mental stop loss and one that I put in before i go to the bathroom.
I ran another test and 4 lots, 10k Jan1 - feb 9, No SL, TP 50, GBP/USD.
Results Below.
I think there might be a bug in the EA as it opened a buy order on 2/8/07 @ 1:00 for no reason. Thats why the last order is down 5000. If thats fixed it would be a sell and would have close with 50pips.
This thing is amazing if you have 10 to throw at it without feelings.Ignored
DislikedThat's interesting JamDown. So, maximum drawdown was 5k, and it was never hit? It never hit margin requirements? Was that the farthest it went down? What about November when the GBP skyrocketed up? What about back testing it a couple more months to see what happens there?
Thanks for your results though!!
BPIgnored
DislikedHere are the results from the USDJPY. SL is the killer for this EA. You just have to keep an eye on your trade.Ignored
DislikedMaybe I am just not understanding your report then, but it shows absolute, maximal, and relative drawdown as zero. But what I am wondering is during an open trade...even though it is not closed out, how far into the negative does it go before it swings back up?
Thanks JamDown.
BPIgnored
DislikedHey NKE! The 'half kelly" is a money management system. Essentially the kelly system is a bet sizing system. It was made popular by the MIT prof. Edward Thorp, the man who inveted hi-lo card counting for blackjack and broke Vegas. After cleaning up, he published his card counting strategy (resulting in the prosecution of card counters from that day on). He used the Kelly System for placing his bets.
He started a hedge fund and used the "helf kelly" system for placing trades... basically using the kelly but the initial position is half of a normal kelly bet. His success brought this system popularity in securities trading and variations of it have been used by traders and fund managers ever since!
I use a half kelly system on my initial trade position and add to my position as the account increases... still using the kelly system to either get out of my trades or figure out initial position size.
Here's the link for the Kelly:
www.bjmath.com/bjmath/thorp/paper.htm
and you can always google Kelly System
Happy Trading!Ignored
Dislikedmwilkinw can you kindly explain as simple as possible the practical approach of using the formulas when it comes to forex trading? I think this is very important, it deals with position sizing to maximize investment growth but I just cant undertand it.
-MikhailIgnored
DislikedIndeed, this is of utmost importance. Kelly's formula provides you with the optimal percent of your capital you can risk on a single trade. To use the formula, you have to know the history of a trading system performance: what is the size of a win W (or average win size if it varies), what is the size of a loss L (or its average) and the proportion P of wins out of total number of bets. The assumption is that you place one bet (trade) at a time. Kelly's percent is calculated then using this simple formula:
Kelly% = P - [(1-P)/(W/L]
For example, take Pouria's trades for Jan-Feb 2006 (I'm just starting optimizing this method...). If you'd use a 46 p. SL and a 33 p. TP target (spread not taken into account), you'd have 5 losses and 33 wins (P = .87). So, Kelly% is
Kelly% = .87 - [(1-.87)/(33/46)] = .69.
This means, that you can risk 69% of your capital on a single trade. If you have a 1000 p. capital, and you can risk 690 p., you can you can open 690/46 = 15 positions (again, spread and margin considerations nottaken into account).
Since Kelly% is based on historical performance, and history never repeats itself (at least, the better parts of history, the worst ones tend to repeat over and over again), and since using exact Kelly% leads to huge drawdowns, and since most people don't have the nerve for such a risk, it's customary to use half the Kelly's percent, i.e., in our example, open 7 positions. I don't even have the nerve for that, and usually don't risk more than 15% simulteneously...
mwilkinw, please correct me if I got something wrong. I teach statistics, but always have all my calculus messed up...Ignored
Dislikedsnip... The kelly formula allows you to figure out your position size based on past performace. (that is why I like backtesting so much)... snip... Ilanr.. you're a statistician... I'm a mathematician!Ignored
DislikedLOL I agree.
Its wierd though when you test it starting 2007 it does pretty well. but everything before that just doesnt work... so when backtesting pls enable visiual mode then load the indicators in the testing charts to see if the Expert is doing things that is against the original pouria method. If its faithful to the method then the problem is just optimization, if its still not profitable after optimization then the problem is either strategy tester (which could likely be because we have small TP and SL levels) or the strategy itself needs rethinking...
-MikhailIgnored
DislikedOk ive manualy backtested EURUSD for september,october and november,with stop of 14 including the spread and here are the results ( they of course may not be accurate 100%)
W-winners or profitable trades
L-looosers or losses
SEP
when tp=15 you get
15W-10L = +85
when tp=20
13W-12L = +92
OCT
when tp=15
10W-12L= -18
when tp=20
9W-13L = -2
NOV
when tp =15
10W-9L= +24
when tp=20
9W-10L = +40
Max consecutive wins when tp(15)=4, when tp(20)=3
Max consecutive losses when tp(15)=4, when tp(20)=5
So far January showed best results ( posted earlier) for EURUSD , i havent tested any other pairs.
Ignored