John W Elite    Posts: 654 Joined: 10/11/2012 Location: Sydney, NSW, Australia  User Profile | OV generally uses a percent of equity approach to determine position size. There is a lot of research popularised by van Tharp that although this model is the best for long term trend followers, a volatility based position sizing approach is better for shorter time frames, more volatile stocks, stocks with smaller trading volumes, and where tighter stops are used in general. Deciding how much capital to allocate to systems with positive expectations is the key to the size of drawdowns and how much money is made. In many of the Omni Trader University training courses the instructors emphasised the importance of smooth charts as part of the setup criteria, and with OV we will be able to trade an enormous range of stocks from very large to very small with significant differences in smoothness of the charts, therefore the importance of adjusting for volatility. Is it possible to add a third account setting to adjust the trade size based on volatility, so that the more volatile a stock, the smaller the trade size, similar to the Turtle Trader approach. The intent is to keep risk fixed to (configurable) 1% or 2% of equity based on (configurable) the 14 day ATR. This rule to apply with the two other trade size account settings, so that the trade size is the smallest of: This fixed risk rule, The % volume rule, And the maximum number of trades on the same symbol rule. The only question that comes to my mind is whether or not adding this fixed risk rule would improve the OV simulated outcomes (it’s a moot point whether theories actually hold up when tested) - is it possible for the programmer to add this rule and test if it would make a positive difference and if so, to implement it? John | |
