Systematic Trading research and development, with a flavour of Trend Following
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Entries Tagged as 'Money Management'

Futures Trading and Small Account

July 12th, 2011 · 17 Comments · Futures, Money Management, Strategies

I recently spent more time doing “reading research” rather than “testing research”. As result, this post resembles a collection of links on ideas seen on the web of how to trade futures with a small account – one of the topics I have been interested in. The Issue: Diversification with Small Account A small account […]

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Drawdown Reduction

March 30th, 2011 · 13 Comments · Money Management

I was recently reading a blog post discussing “trading the equity curve” of a system. This usually entails adapting trading size based on whether the equity curve of the system is below or above its equity curve. A similar concept is described in The Way of the Turtle, by ex-Turtle Curtis Faith: The Turtles were […]

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Practical Leverage Space Model – a More Realistic Test

December 21st, 2010 · 18 Comments · Money Management

How can you apply the Leverage Space Model in real-life trading? The last study on the Leverage Space Portfolio Model was interesting from a theoretical point of view. Its main value was in illustrating the concepts of the framework with real-life data, but it did not have much practical application: on top of some “unpractical” […]

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Low Winning Percentage = more Robust Systems?

December 9th, 2010 · 19 Comments · Money Management

  One of the characteristics that deter traders from using Trend Following is the typical lower winning percentage rate (i.e. ratio of winning trades vs. losing trades) of such systems. It goes against the natural instinct of “wanting to be right most of the time” as trades end up in a loss more often than […]

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Vince's Optimal f and the Leverage Space Model – Take 1

December 2nd, 2010 · 23 Comments · Money Management

Following the Risk-Opportunity Analysis conference I attended earlier this month, I decided to test the model and the software used to implement it (Vince‘s java app and Joshua Ulrich’s R implementation). Most of the mathematical formulas supporting the model are in the book Leverage Space Trading Model. I will not paraphrase the book and reproduce […]

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Risk-Opportunity Analysis

November 25th, 2010 · 11 Comments · Money Management

I have been travelling in the last three weeks. One of my destinations was Tampa, Florida, where I attended Ralph Vince‘s Risk-Opportunity Analysis course, over a weekend (check here for a presentation of the course). My main objective for attending was to strengthen my knowledge of Money Management/Position Sizing and my understanding of the concepts […]

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Trading Diversification: A Free Lunch?

November 10th, 2010 · 20 Comments · Backtest, Money Management, Strategies, Trend Following

  The more I think about system design, the more I get convinced that diversification is a key to great performance. As the cliche goes: Diversification is the only free lunch on Wall Street. This is a concept equally shared by Modern Portfolio Theorists and Trend Following Wizards, who usually emphasise the concept – and […]

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Snapshot on Money Management and Leverage – Corrected

October 8th, 2010 · 5 Comments · Money Management

There are two simple options that can be used to leverage a strategy: position sizing notional funding These were discussed more in detail in a “how to apply leverage?“. Today, I just want to revisit this concept with a classic system: the Donchian Channel. As Ralph Vince’s Optimal f tells us: there is an optimal […]

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Your worst Drawdown is yet to come

May 27th, 2010 · 4 Comments · Money Management

in this world nothing can be said to be certain, except death and taxes. Arguing against Ben Franklin, I would say it is certain your (and my) Max Drawdown so far – whether in real trading or backtest – will be surpassed in the future. The maths even say that the probability of any drawdown […]

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How to apply Leverage?

April 20th, 2010 · 13 Comments · Money Management

Several CTAs or fund managers offer a standard version of their fund, along with a leveraged version (called enhanced risk, 2x or 3x fund, etc.). However a simple performance comparison of the leveraged option against the standard option usually makes it obvious that the former does not offer a simple performance multiplier of latter. I […]

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Vince’s Leverage Space Model: better than MPT?

March 22nd, 2010 · 33 Comments · Backtest, Money Management

Ralph Vince‘s book Handbook of Portfolio Mathematics has been shamefully lying untouched on my desk for a few months… I started reading it but never finished it. I recently found a 30-page paper introducing the ideas and principles of his Leverage Space Model. I thought reading it might be a good way to get back […]

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Are you reading the essential books?

October 13th, 2009 · 4 Comments · Backtest, Blog, Books, Code, Data, Development, Money Management, Software, Strategies, Trend Following

I am bit of a geek and this is especially true when it comes to books. I firmly believe in self-development and I think books are a great medium to learn many things. Ok, the internet is so great to learn about new things; but nothing beats a good in-depth book(s) to really learn a […]

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Balsara: Money Management Strategies for Futures Traders

September 29th, 2009 · No Comments · Books, Futures, Money Management

Over the weekend I finished this pleasant and instructive book… Over time I am aiming to build a library reference on this blog with a summary of all the books I have found useful. The idea is to be able to recall quickly the main points of the book. Hopefully you will find it useful […]

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