Over the last four articles people have been writing in, asking, “How do you deduce leverage from your backtests?” “How do you actually implement leverage in your trading?” “How do you calculate position size?” “How often do you rebalance?” So, to keep this series as hands on and close to reality as possible, this article […]
Dangers of Backtesting, Over-Leverage and the Need for a Protective Stop
Backtesting and Over-Leverage are the bane of any systematic trader. A shout out to Peter who raised both these points on the previous article in the series: Trading Numbers So, what are the two issues we’ll address in this week’s article: Look ahead bias, and is it really that bad? Kelly is always touted as […]
Money Growth: Trade it Like a Hedge Fund
In previous articles I’ve written about the idea of Kelly betting or using leverage to really boost the growth of your returns. I’ve also shown how different fundamental components work together to create an FX Benchmark index. This article is slightly different. I want to keep it KISS: “Keep It Simple Stupid.” I will show […]
Risk, Return, and Kill Ratios
In this week’s article I cover the right approach to benchmarking your performance using the standard risk measures out there. In particular we’ll start out by outlining how the Sharpe Ratio relates to the usual performance measures such as Win/Loss ration or Return/Maximum Draw-Down ratios. This will allow you to see if you are on […]
Kelly – What Is It and How to Use It
Kelly betting is an optimal approach to allocating capital to your system. In this article I want to show you how to apply this approach to your trading, and more importantly what kind of interesting questions you can answer using the ideas behind Kelly betting, in particular: “How long does it take to double my […]