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#1
30th June 2007, 06:01 PM
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Kelly's original report of 1956
Dear friends,
In the books Market Wizaeds, Newmarket Wizards and StockMarket Wizards I found all the traders concured on two points 1)Undertrade 2)Money management. I found most of them use FA but some equally successful use TA, but they all concur on the above two points. As far as moneymanagement is concerned Ralph Vince is supposed to be the foremost expert in the world and he has devised the Optimal F methos which Elder talks about in his book, however as Optimal F results in large drawdowns and one has to know one's largest drawdown before applying it, its not very useful to amateur traders. Elder and Van Tharp in his MM report book recommend an alternative called Kelly Criterion. The original Kelly formula was developed in 1956 to solve a problem involving random interference in telephone lines. Kelly discovered a method of incresing data flow while reducing random information loss. Although the formula is critical for traders wanting optimal rates of return once again drawdown can be quite large and is a problem most experts including Van Tharp recommend using 80% of the Kelly formula. Here is the original report http://www.turtletrader.com/kelly.pdf Hope you find it useful. 
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#2
21st July 2007, 10:32 PM
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Re: Kelly's original report of 1956
Hi
Have you tried applying the kelly criterion to the indian scenario and options especially? Isnt it only for asset allocation or to determine how much of the funds you would like to bet / trade on. Your experience will be valuable br
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