gbarber Member  Posts: 28 Joined: 2/26/2018 Location: PEARLAND, TX  User Profile | I should have included more info from the web definition of Kelly criteria to make that equation reasonably calculated: Putting It to Use Kelly's system can be put to use by following these simple steps: 1. Access your last 50 to 60 trades. You can do this by simply asking your broker or by checking your recent tax returns if you claimed all your trades. If you are a more advanced trader with a developed trading system, simply back test the system and take those results. The Kelly Criterion assumes, however, that you trade the same way now that you traded in the past. 2. Calculate "W"—the winning probability. To do this, divide the number of trades that returned a positive amount by your total number of trades (both positive and negative). This number is better as it gets closer to one. Any number above 0.50 is good. 3. Calculate "R"—the win/loss ratio. Do this by dividing the average gain of the positive trades by the average loss of the negative trades. You should have a number greater than one if your average gains are greater than your average losses. A result less than one is manageable as long as the number of losing trades remains small. Input these numbers into Kelly's equation above. Record the Kelly percentage that the equation returns. Since portsim has all of the backtest available, it seems like this equation could have been used but based on the significant difference in parameters used, apparently a very different calculation was used in portsim. | |
