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Jim Dean

Posts: 3022

Joined: 9/21/2006
Location: L'ville, GA

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Subject : RE: Most and Least-Useful PortSim Alloc Methods
Posted : 8/30/2018 8:42 PM
Post #45294 - In reply to #45293

Hi Larry

I fully agree that dollars at risk in a trade (ie entry vs stop times shares) is highly important - and for most active stock traders, likely more important to portfolio heath than the capital tied up in the trade. The Turtle Trader plugin provides an allocation method based on volatility-risk, which is a close cousin.

My recent posts have been trying to encourage people to use a more mathematically rigorous and pragmatic choice for allocation than compounded % Equity. For simplicity’s sake, using the tools we all have at hand now, fixed-$ seems the most justifiable and reliable selection when trying to choose between alternative strategies or methods or parameter settings.

However - I would also consider Fixed Risk $ to be a reasonable method, as long as that same method is used in actual trading (for those that own Turtle Trader). If the strategies being considered all use some form of volatility-based exit methods (such as trailing stops based on atr-multiples), this would be the superior choice. Since it’s not compounded, it keeps a level playing field for all trades across a testing period.

It’s my observation though that most strategies produced by Nirvana tend to gravitate to exit methods that are either time based or %price based (rather than ATR-volatility based). Insofar as that may be the case for a given set of tests, fixed $ would likely yield more statistically-representative conclusions.

[Edited by Jim Dean on 8/30/2018 8:45 PM]

Deleting message 45294 : RE: Most and Least-Useful PortSim Alloc Methods

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