Assuming the following system and $25,000 starting capital:
results(ROI by “event”):
1:397% (average was skewed by a +1500% in GMCR, a 1000% in YELP and a few 500-800% gains in AAPL,BAC,GMCR(2),LNG,AMZN,PCLN)
2:57.51%
3:0.28%
4:-69.69%
5:-100%
Odds (of corresponding “event”)
1:23.44%
2:9.38%
3:4.69%
4:9.38%
5:53.13% (I assumed all current trades on the books went to zero to prevent unfair bias of only counting the completed trades while the open positions were negative)
Simulated expectations and probabilities over 200 trades…
1% position size:
median result:$45,000? Mean:$51,574
46.5% chance of double over 200 trades ($50,000)
7.5% chance of 200% over 200 trades ($75,000)
1.1% chance of 300% over 200 trades ($100,000)
(note:drawdowns are measured from highs and count if they occur at any point in time over 200 trades)
Chance of 20% drawdown 10.7%
Chance of 30% drawdown 0.9%
Chance of 40% drawdown 0%
Chance of 50% drawdown 0%
1.5% position size:
median result:$60,000? Mean:$73,800
79.1% chance of double over 200 trades ($50,000)
41.8% chance of 200% over 200 trades ($75,000)
18.7% chance of 300% over 200 trades ($100,000)
9.5% chance of 400% over 200 trades ($125,000)
4.5% chance of 500% over 200 trades ($150,000)
2.2% chance of 600% over 200 trades ($175,000)
1% chance of 700% over 200 trades ($200,000)
Chance of 20% drawdown 40.6%
Chance of 30% drawdown 6.5%
Chance of 40% drawdown 0.2%
Chance of 50% drawdown 0%
2% position size:median result:$85,000? Median:$112,200
40% drawdown kill switch:4.4% chance of hitting
87.6% chance of double over 200 trades ($50,000)
65.8% chance of 200% over 200 trades ($75,000)
46.6% chance of 300% over 200 trades ($100,000)
29.6% chance of 400% over 200 trades ($125,000)
18.9% chance of 500% over 200 trades ($150,000)
13.8% chance of 600% over 200 trades ($175,000)
10.5% chance of 700% over 200 trades ($200,000)
Chance of 20% drawdown 75.1%
Chance of 30% drawdown 41.17%
Chance of 40% drawdown 4.8%
Chance of 50% drawdown 0.4%
3% position size: median result:$135,000? Mean: $234,500
78.3% chance of double over 200 trades ($50,000)
73.4% chance of 200% over 200 trades ($75,000)
64.6% chance of 300% over 200 trades ($100,000)
54% chance of 400% over 200 trades ($125,000)
49% chance of 500% over 200 trades ($150,000)
44.5% chance of 600% over 200 trades ($175,000)
38.8% chance of 700% over 200 trades ($200,000)
Chance of 20% drawdown 99.2%
Chance of 30% drawdown 66.6%
Chance of 40% drawdown 28.8%
Chance of 50% drawdown 8.3%
Assumes single, Independent trades placed one at a time or zero correlation of trades. Adding correlation increases risk but 2 positions at 2% risk is less risk than 4%.
Awesome! Thanks for a fun read
No problem. Thanks for the feedback. The expectancy of my system really increased from 2013 to 2014 as I learned to let winners run, but part of that may also be from the low vix and a few outliers this yr.