Optimal f

snake · #1 4th August 2008, 01:52 PM

Any opinions on using Optimal f (as described in books by Ralph Vince) to determine postion sizes ?

CreditViolet · #2 4th August 2008, 05:10 PM

Yes.......

Smart_trade · #3 4th August 2008, 05:29 PM

Quote:

Originally Posted by snake

Any opinions on using Optimal f (as described in books by Ralph Vince) to determine postion sizes ?

For most systems optimal f will be between 15 % to 30 %.For a system which has 50 % success rate and reward/risk ratio of 2:1 the optimal f comes to 25 percent of your trading equity to be risked on each trade. With the kind of mkts we are in,this becomes a way too large .

Trading on optimal f requires that one starts with small capital which one can afford to loose. I dont think most of us can bear the huge drawdowns which is a part of trading on optimal f. Larry Williams trades on optimal f and goes to the Church regularly.

I think about 10 % of equity as suggested by Larry Williams is a good viamedia between our 1 % conservative and 25 % opt f trading !!!

Trade well !!!!

CreditViolet · #4 4th August 2008, 05:42 PM

Quote:

Originally Posted by Smart_trade

For most systems optimal f will be between 15 % to 30 %.For a system which has 50 % success rate and reward/risk ratio of 2:1 the optimal f comes to 25 percent of your trading equity to be risked on each trade. With the kind of mkts we are in,this becomes a way too large .

Trading on optimal f requires that one starts with small capital which one can afford to loose. I dont think most of us can bear the huge drawdowns which is a part of trading on optimal f. Larry Williams trades on optimal f and goes to the Church regularly.

I think about 10 % of equity as suggested by Larry Williams is a good viamedia between our 1 % conservative and 25 % opt f trading !!!

Trade well !!!!

Optimal f is a concept, its not a practical method to trade. Using optimal f to determine position size is simply asinine.

beginner_av · #5 4th August 2008, 07:22 PM

Quote:

Originally Posted by CreditViolet

Optimal f is a concept, its not a practical method to trade. Using optimal f to determine position size is simply asinine.

Indeed asinine.

snake · #6 6th August 2008, 12:45 PM

My take on optimal f is that it is provides an upper bound to the amount of leverage one should assume.

For instance, the NSE margining requirements for nifty futures often allow leverage of over 8X. However the optimal f of a nifty trading system may indicate that long term returns decline after a leverage of, say 3X. In this case, optimal f provides useful information to the trader to stay at 3X or lower leverage.

Does anyone have practical experience of implementing optimal f for a mechanical nifty trading system ?

beginner_av · #7 6th August 2008, 03:56 PM

Quote:

Originally Posted by snake

My take on optimal f is that it is provides an upper bound to the amount of leverage one should assume.

For instance, the NSE margining requirements for nifty futures often allow leverage of over 8X. However the optimal f of a nifty trading system may indicate that long term returns decline after a leverage of, say 3X. In this case, optimal f provides useful information to the trader to stay at 3X or lower leverage.

Does anyone have practical experience of implementing optimal f for a mechanical nifty trading system ?

I wont even try unless I am a long term investor with a huge account and have a diverse portfolio in diverse markets and can take a lot of heat.

Smart_trade · #8 6th August 2008, 07:45 PM

Quote:

Originally Posted by snake

My take on optimal f is that it is provides an upper bound to the amount of leverage one should assume.

For instance, the NSE margining requirements for nifty futures often allow leverage of over 8X. However the optimal f of a nifty trading system may indicate that long term returns decline after a leverage of, say 3X. In this case, optimal f provides useful information to the trader to stay at 3X or lower leverage.

Does anyone have practical experience of implementing optimal f for a mechanical nifty trading system ?

Optimal f as described by Ralph Vince in "Mathematics of Money Management"is a function of success rate and reward/risk ratio of the system.If you trade any competent system on optimal f leverage,in 5 yrs you will be richer than Anil and Mukesh Ambani added togather. That is of course if you survive huge drawdowns that are part of the opt f trading.

Best wishes for a very ambitious project,and yes dont forget to adopt me after 5 years.

If you trade 5-7 % of yr equity on every trade you will have more money than you can spend.

Good luck !!!

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