So it is the Kelly formula. I hope the dude gave credit to the person who actually invented it. at any rate Kelly is pretty useless unless you have a long term demonstrated edge that persists in the same relative magnitude over time. Btw the Kelly criterion is designed to optimize your bet size but tells you nothing about how to become successful in the first place.
From: OptionClub@yahoogroups.com [mailto:OptionClub@yahoogroups.com] On Behalf Of bullishengulfing
Sent: Monday, March 01, 2010 1:37 PM
To: OptionClub@yahoogroups.com
Subject: [TheOptionClub.com] Re: Money Management
This is the optimal f formula as defined by Nauzer J. Balsara in his book Money Management Strategies for Futures Traders. f is the optimal fraction (percentage) to be risked on one trade, A is the average payoff ratio (dollars earned to one dollar lost), and p is the average win ratio (probability in percentage of success). It's only one of many ways to position size trades.
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