## Article about using the Kelly formula for position sizing

This is a discussion on Article about using the Kelly formula for position sizing within the Risk & Money Management forums, part of the Trading Control category; Very interesting article by Michael Harris about expected gain and the Kelly formula titled &quot;Relation of Expected Gain to Kelly ...

 Nov 5, 2007, 5:03am #1 Senior Member     Member Since Mar 2005 Article about using the Kelly formula for position sizing Very interesting article by Michael Harris about expected gain and the Kelly formula titled "Relation of Expected Gain to Kelly Formula": http://www.tradingpatterns.com/About.../articles.html I would like to hear your comments about the use of the Kelly formula. To me, even 0.5 x Kelly% is way too much of a risk. Alex __________________ Buy high, sell higher - Sell low, buy lower
 Nov 7, 2007, 11:51am #2 Senior Member     Member Since Sep 2004 Re: Article about using the Kelly formula for position sizing I use the slope of a 4 period Juric moving average of my own equity curve for a system to determine how close to optimum-f to run. In most systems the allowed range is 43% to 102% of optimum-f, but some are constrained to ranging between ~30 to ~70 % of optimal-f . My (not necessarily mathematically sound) criteria for setting these ranges is on that key factor in optimal-f which is the 'largest loss' figure you give it to perculate with. Note: This kind of mm can still result in some pretty wild and agonizing rides - but at least the recoveries from dd's are quick.
 Nov 8, 2007, 3:00pm #3 Legendary Member     Member Since Jun 2005 Re: Article about using the Kelly formula for position sizing thanks alex. interesting stuff. here's a link to more kelly stuff for those interested - less mathematical and more on the underlying thought... http://www.lmcm.com/pdf/sizematters2.pdf __________________ hope is not a strategy
 Nov 8, 2007, 3:26pm #4 Legendary Member     Member Since Jan 2004 Re: Article about using the Kelly formula for position sizing I think kelly is a nutcase. __________________ "I refuse to tiptoe quietly through life only to arrive safely at death"
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