Here are some good articles on percent-risk position sizing:
The Percent Risk Model: Size Does Matter
The results below show the performance of the Power Dip system risking 2% of account value on each trade (all previous tests have used 1% risk), with a maximum of 5 position held at one time. All other parameters from previous tests remain the same: .01/share commissions, 10% stops, opened at the open and closed at the close.
The system grows capital to such a large amount that near the end of the test period, it would be buying positions so large that it would move the market. The point is that doubling risk nearly doubles performance.
More needs to be explained about using percent risk position sizing, but this will have to suffice for now. Feel free to ask questions in the comments section.
Very nice. Do you have logarithmic version of the chart above?
Sure do blink. I was going to put it in the post, but it was very late. I’ll update the post tonight with the log chart.
Thanks, Wood – makes more sense now. So you keep the same stop but halve the number of positions held at once and double the size of each.
Why have you chosen to go with the 10-positions-1%-risk model instead so far? Just for peace of mind?
Michael exactly. Psychologically, 1% is better for me. I am less likely to skip a trade or do something stupid with 1% risk as I basically okay with losing that amount of money. However, I am considering switching over to 2% and trying it out to see how it feels.
That’s some graph, definitely getting into the ‘too good to be true’ catagory
That said 2% per trade doesn’t sounds like that big a deal
Hey Wood – have you tried varying the timeframe? 5 years, 10 years?
Sure. I can run 10 years for you.
Although a max. trade loss of 92 million may sound a bit hurtful, the overall results are quite astounding really. Thanks for all the hard work.
No problem. Obviously, as noted in the post, you wouldn’t be able to replicate the results as you’d be moving the market. IMO, I would probably quit once I had amassed, say, 100 million, lol
Shut up, power dipshit.
how can someone with sub-6 figure account use this system effectively? i’m looking at this from the viewpoint of being affected by commissions.
Hammy, check out this post…
http://ibankcoin.com/woodshedderblog/2009/09/23/commission-structure-small-accounts/
I would be worried about someone with a sub 10K account, but as I’ve written else where, a primary concern will be whether one can has a margin account as there will be many times when the trades will not settle before cash is needed again for the next trade.
thank you
Hey Wood,
Have you stopped publishing PD selection or have you not had any this week? Just wondering.
Best
Hi Tilo, been traveling.
NLST has been the only power dip buy over the last three days. It has just been selling off each day, but still meeting the criteria. I got stopped out of it early last week.
I am going to post a final roundup of the PD trades I’ve tracked, but after that, I will no longer be publishing the picks.
Thanks, Wood. I was just wondering if it was market conditions or something else.
When will the subscription site be launched?
The lack of trades over the last 3 trades is due primarily to market conditions. The market has been in a neutral to overbought range and therefore the system has been closing trades, for the most part, rather than opening new ones.
We start testing out email alerts and the payment gateway tomorrow. Assuming they work as they should, not much longer!
you guys are considering offering an active duty discount, right?