Review your Strategies (=Tactical Asset Allocation Portfolio)
Rebalancing the portfolio monthly/quartely in contrary to lazy portfolio (fire and forget).Min. Position Size
- Define Statement of Profit Success (95% confidence that you have more than 2.0 Return/DD Ratio)
- Find the position size (via Monte Carlo) that fulfills statement
- This position size equals your fraction 0.01
Max. Position Size
- Define Statement of Risk Tolerance (95% confidence that you have no more than 10% drawdown per year)
- Find the position size (via Monte Carlo) that fulfills statement
- This position size equals your fraction 1.00
Position Size Strategies
- FFPS (Fixed Fractional Position Sizing): eg. 2% risk everywhere, unbiased, independent from winrate or profit of a strategy
- ECMA (Equity Curve Moving Average): apply an EMA20 over your equity curve, stay with your strategy as long as the curve is over the MA
- CAR25 - 25th percentile of compound annual rate of return of the risk-normalized performance (source)
- Oscillating position size Part 1 , Part 2
- Ulcer Index ("emotional stress" indicator) (source)
- Decreasing convex curve between min/max pos. size, when equitiy is going down: y = -log(π^2)x
- Increasing convex curve between min/max pos. size, when equitiy is going up: y = log(x) +1
- Max. pos. size when Ulcer Index < 40%
- Min. pos. size when Ulcer Index > 80%