Percentage vs fixed amount in trading.

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I want to share this.


Maybe we can build a function for this.
 
Dominik Egert:
I want to share this.


Maybe we can build a function for this.

Like in a Hank Williams, Jr. song... "Gets me excited--Leaves me feeling confused."

Can a fixed position size in a fixed trading time span really improve odds in a series of coin tosses? That doesn't seem to pass the sniff test.

Edit: Apparently, it's a real theory (the math is much simpler on Investopedia):
Kelly Criterion Explained: Optimize Betting and Investing Strategies
Kelly Criterion Explained: Optimize Betting and Investing Strategies
  • www.investopedia.com
John L. Kelly Jr. created the Kelly criterion formula in 1956 at AT&T's Bell Laboratories. It helps determine how much to invest in a given asset to maximize wealth growth over time. Key Takeaways The Kelly Criterion is a formula created by John L. Kelly Jr. in 1956 to help maximize wealth growth by determining optimal investment sizes...
 
Ryan L Johnson #:

Like in a Hank Williams, Jr. song... "Gets me excited--Leaves me feeling confused."

Can a fixed position size in a fixed trading time span really improve odds in a series of coin tosses? That doesn't seem to pass the sniff test.

Edit: Apparently, it's a real theory (the math is much simpler on Investopedia):

Mostly, experienced traders suggest to work with a percentage risk, thus removing the absolute numbers from the emotional impact when trading.

The concept of using iE 0.1% from current balance is obviously not a bad approach. On the other hand, always working with a fixed amount is very easy to use for the statistical outcome over time.

What I was thinking is, if you take the trading history of an account, and analyze the outcome to extract the WR and RR, it should be possible to figure the "coin-toss-results" and that could now be optimized via the method described in the video.

As a result, this should give the optimal risk percentage to be used on that account.

If the history on that account is generated by an algorithm, it could lead to turn a barley winning strategy into a better outcome.

After all, algo-trading is a statistical game.
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