> > > In either case, calculating the kelly fraction, and *not* using it to > determine bet/position size is a pointless calculation. > > I disagree. In my previous comment, I used the comparison between strategy A and strategy B, but what actually happens in JBT is that it's the same strategy that is being evaluated by the optimizer with respect to the optimization parameters. So, let's use Lawrence's example of a simple crossover system. For example, the rules may be that we buy when EMA(N) is above EMA(K), and we sell otherwise. In this particular instance there are two parameters, N and K, and the same strategy can be optimized with respect to different combinations of these parameters. Furthermore, if you plot these combinations of parameters against the corresponding performance metric (such as Net Profit, Profit Factor, and Kelly), there is often a pattern with what I call a "sweet spot", which is the area of bets performance which looks like a plateau, rather than a spike. Now, my argument is that identifying these areas using Profit Factor is just as useful as identifying them using Kelly. If you are using Kelly, the plateau is that elevated surface where a particular combination of parameter values (and the surrounding parameter values) yields high Kelly, meaning that in the neighborhood of certain values for N and K, the strategy is stable and is performing well. Now coming back to my previous 30-60 example, we are essentially saying that we have twice more the amount of confidence in strategy B, compared to that of strategy A, and as such, we'd rather trade strategy B. So, again, in JBT, Kelly is used for a non-conventional purpose: instead of using it to calculate the bet size relative to the account size, it's being used for ranking strategy parameters under optimization.
Now, having said that, there is nothing in JBT that prevents one from implementing Kelly the way you seem to suggest, namely calculating the position size based on the strategy historical performance. The IB API transmits account information, so it's straightforward to capture it. However, I have no plans for implementing it at that point. -- You received this message because you are subscribed to the Google Groups "JBookTrader" group. To view this discussion on the web visit https://groups.google.com/d/msg/jbooktrader/-/VItA_SCwjWcJ. To post to this group, send email to [email protected]. To unsubscribe from this group, send email to [email protected]. For more options, visit this group at http://groups.google.com/group/jbooktrader?hl=en.
