Capital Allocation

Mikey12345 · Jul 2, 2010

Hi All,

Lets say i have $1,000,000.00. Are there any methods that will help in deciding how much to put in the stock market. I was thinking along the lines of a dynamic formula. Say the rsi(14)<30 for the DOW, this would generally indicate that things were oversold so you would want to be overweight the market. The formula would be 1000000*((100-rsi(14)/100)) = 700,000 perhaps this has already been discussed before.

All the best.

scose-no-doubt · Jul 2, 2010

pboyles · Jul 2, 2010

Mikey12345 said:
Hi All,

Lets say i have $1,000,000.00. Are there any methods that will help in deciding how much to put in the stock market. I was thinking along the lines of a dynamic formula. Say the rsi(14)<30 for the DOW, this would generally indicate that things were oversold so you would want to be overweight the market. The formula would be 1000000*((100-rsi(14)/100)) = 700,000 perhaps this has already been discussed before.

All the best.

If you have any sense at all you wont even think about it. There is nothing that works as simply as you suggest, you'll end up losing more than you make.

ThomasJ02 · Jul 4, 2010

Mikey12345 said:
Hi All,

Lets say i have $1,000,000.00. Are there any methods that will help in deciding how much to put in the stock market. I was thinking along the lines of a dynamic formula. Say the rsi(14)<30 for the DOW, this would generally indicate that things were oversold so you would want to be overweight the market. The formula would be 1000000*((100-rsi(14)/100)) = 700,000 perhaps this has already been discussed before.

All the best.

The classic answer is to use the Kelly Criterion (google it if you haven't heard of it before). However, to use this, you'll have to be able to quantify your edge. To take your example, what does the expected return and standard deviation of your investment look like when rsi(14)<30?
This might be hard, but on the other hand if you can't quantify your edge, you probably shouldn't be trading.

N Rothschild · Jul 4, 2010

invest a million dollars on what the rsi is doing? wow.

JDW1411 · Jul 14, 2010

Ed Seykota has done some great work in this field.

Capital Allocation

Mikey12345

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scose-no-doubt

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pboyles

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ThomasJ02

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N Rothschild

Legendary member

JDW1411

Newbie

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