Use This Gambling Formula to Size Your Investment Positions
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- čas přidán 28. 08. 2024
- The Kelly Criterion is a formula that has been used for decades now by gamblers, investors and traders alike to properly size bets, trades, and positions. The equation looks at both the probability of winning and the amount normally gained or lost to produce the proper percentage to allocate. Without discipline in sizing your bets, one losing trade can wipe you out. If you size each position correctly though, your wins will outperform your losses.
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This channel has a lot of value. It’s arguably one of the most underrated channels here on CZcams
Thank you, I appreciate it!
Heresy Financial you’re welcome.
Joe is bright, for sure! He's down the road and back sometimes before I even get going!! Lol!
Cool formula. Options sizing is interesting since the number of shares you're exposed to changes day to day.
I ended up with a negative ratio Joe! To me
it means stop gambling or trading in the stock market.
stop
Just stop… do normal daily business
Trading is not for everyone. Maybe there’s a truth in 90% of trader lost their investment
How was your portfolio gain after a month using this?
Dude I should pay for the mini economics degree I am getting from your channel
kelly criterion assumes binomial distribution ... but does your return distribution follows binomial? There is risk of ruin because of the fat tail in reality maybe use half or 1/4 kelly... to be safe
Let's dive in!
What happens with pushes say win 60% lose 38% and push 2% of the time without losing or winning. The 1-W not going to be 38%
love your channel
What ‘K’ would you consider to be good?
"A Man for All Markets"
So with a 70% win rate & winning trades at $500 and loosing trades at $250 I'd have a position size of 55%. Did I do the math correct?
now use a fraction
divide that by 10
Hey a just a quickie: was the long depression really that bad? Cause i remember you use that part of history to justify how deflation benefits the poor
There was MASSIVE inflation (monetary expansion) in the Great Depression. FDR confiscated all the gold to raise the Fed's reserves, which allowed them to print more money. Then he raised the price of gold (lowered the value of the dollar) which allowed them to print even more money. The deflationary forces were still strong enough to lower prices, even with all the monetary inflation. With everyone destitute, can you imagine how much worse it would have been for people had prices not fallen? Low prices was the only thing keeping people from starving to death, and it allowed assets to change hands from the over leveraged to the more responsible at discount prices.
@@HeresyFinancial no im talking about the 1880s and 1890s
He he.. thats wrong ! . Short vision! Do a kelly criteria on your long trades winrate and a kelly criteria on your shorts winrates.. your long trades entry condition is different from a short entry condition .. so mixing the thing will not be helpfull .
We have to think beyond thin public knowledge!
first like on deck
You don't take in account correlation so this entire video is pointless. Also the sample size used to gather the inputs makes no sense. Unless you're dumbing it down on purpose idk.
👋 Can you explain that in a little more detail please?