Something that not often is taken in to account in these type of calculations is unrealized losses in trading.
Understanding the effects of unrealized losses is even more important when working with leverage.
Typically mean reversing strategies comes out with a high win ratio and high average profits, which will indicate big allocation per trade. However biggest loosing trades are normally very big and maximum draw down on those trades much bigger, the allocation calculation will most likely indicate a much bigger allocation than what you are comfortable with…
Something that not often is taken in to account in these type of calculations is unrealized losses in trading.
Understanding the effects of unrealized losses is even more important when working with leverage.
Typically mean reversing strategies comes out with a high win ratio and high average profits, which will indicate big allocation per trade. However biggest loosing trades are normally very big and maximum draw down on those trades much bigger, the allocation calculation will most likely indicate a much bigger allocation than what you are comfortable with…
Very true! Most traders underestimate drawdowns and quit after 20%, perhaps most likely before that.