mholstius Veteran   Posts: 175 Joined: 1/13/2017  User Profile | As I said, I just wanted to share what I found: that the inevitable losses generated by RTMs “piling on” when there’s a significant drop in the market might be mitigated by increasing the normal allocation. To be honest, I was surprised by the magnitude of the improvement that came with increasing the allocation. I’m sure it’s only part of the puzzle. Decreasing the DDs remains a primary objective for all of us, and these results might be influenced by the weighting and ranking factors used in the FTM portfolio’s dynamic lists. The basic premise of increasing the allocations might influence the direction taken in further testing by folks using ATM, etc. I expect to see substantial improvement in the results when applying the benefits of ATM and the GA. To Jim and Larry… Most assuredly, the risk of ruin goes up with increased allocation – so I did some additional analysis. The FTM portfolio increases the trade allocation based on how many times a trade is triggered for a symbol in the various strategies that day: 1X = 20%, up to 5X = 100% The following capture breaks down the trades over the past 15 years by allocation with a couple of ROR calculations below the table; The table has a row for each of the allocation levels (20% to 100%) with conditional formatting to color code the performance in each column. The average allocation was 32.9% (last row, highlighted in orange). Row 1) 995 of the 1,663 trades over the past 15 years were done using 20% allocation; they accounted for 59.8% of the trades and 36.4% of the total equity invested. Row 5) Only 41 of the trades were made using the full 100% allocation; they accounted for 2.5% of the trades and 7.5% of the total equity invested. It’s interesting to note that in general, the performance (PPT, HR, etc.) increases as the allocation increases; the trades triggered by more than one strategy. This tells me that the multiple confirmation method in the FTM portfolio is working. Obviously, this would change if I limited the allocation to a max of 60% or 80% since different trades would then be taken. I’ve also included 2 popular Risk of Ruin calculations and their web sites. The 1st shows a 7% ROR but the calculation isn’t very specific. The 2nd (a Monte Carlo calculation that varies with each run on the web site) shows that over 15 years there’s about a 6% chance of losing 80% of equity. If you set the loss limit to a 100% loss, it calculates a 0% chance. Buffalo; I agree with your suggestion about using $VIX – and the new VAT method just released by Nirvana may help with research and development in that area. Mel; thanks for reminding us about your presentation about dynamic sizing and attaching it. I hope Nirvana can do more with that, as I’ve always found your concepts and ideas to be stimulating. Vinay; I hope that further testing and development will make the RTMs more stable and productive. This allocation idea may be a step in the right direction, but it needs more verification beyond this one example. Mark [Edited by mholstius on 1/30/2019 3:18 PM]  Attached file : 00 allocations table.png (177KB - 1778 downloads) |
