Assume a system with trades: +10, +20, -5 (Worst loss = -5).
Vince admits that trading at Optimal F exposes you to massive drawdowns. If your Optimal F is 15%, you might experience a 60% equity drawdown in the future. This is mathematically acceptable (you might still end up a billionaire), but psychologically impossible for most humans. Assume a system with trades: +10, +20, -5 (Worst loss = -5)
Ralph Vince is a computer scientist and trading theorist. He served as the Executive Vice President of the Telerate division of Dow Jones. He is known for his outspoken critiques of the academic finance community, specifically regarding the concept of "risk" and modern portfolio theory. He has authored several sequels, including The Mathematics of Money Management and The Leverage Space Trading Model. This is mathematically acceptable (you might still end
If you are trading a $100,000 futures account and your system’s Optimal F is 30%, you must trade $30,000 worth of margin per contract. If you trade $10,000, you are leaving exponential millions on the table. If you trade $40,000, you are mathematically guaranteed to go bust. He is known for his outspoken critiques of
This leads to the . [ GM = (HPR_1 \times HPR_2 \times ... \times HPR_n)^1/n ]