PosSizer - Percent Volatility
Author: gbrobert
Creation Date: 9/14/2010 9:25 AM
profile picture

gbrobert

#1
I've downloaded the PosSizers extension and am trying out Percent Volatility on my code. Using the following: Percent Volatility .500, ATR Period 14, Cap position at 2% of equity and Decrease risk in drawdown. I'm new to this and am trying to recreate the Turtle code just as an exercise in programming which I haven't done in a while.

For some reason, the positions this generates are huge and I don't know why. The first trade done on a $50000.00 portfolio is for about $28000 which is obviously way above 2% of equity. Is there something I have to have in my code to get this to work correctly? It doesn't seem to make a difference to the position size if I check the cap position box or not.

Thanks,

Glenn
profile picture

Eugene

#2
The Cap Position option is broken and will be fixed in the upcoming build. Thanks Glenn.
profile picture

Eugene

#3
Done, please update to 2010.10.
profile picture

akardar1

#4
Hi Eugene,

We have been working on something that uses the RISKSTOPLEVEL wealth script property alongside the MAX PERCENT RISK position sizer.

Out of curiosity, we tried replacing the MAX PERCENT RISK with the PERCENT VOLATILITY MODEL and found that it required huge amounts of starting capital (with much better risk adjusted returns) but did not exactly align with initial risk per trade as expected.

We read:

QUOTE:

How do I implement volatility position sizing?

Position sizing based on volatility suggests to keep a wider stop when the market has a higher volatility while preserving your maximum per trade loss, effectively instructing to buy less shares during volatile periods, and more shares during calmer periods.

A simple and effective solution that requires no coding: the Percent Volatility PosSizer. As an alternative, to determine the stop based on volatility (for instance, as a multiple of the ATR unit), pass it as RiskStopLevel before taking the Position, and use Max Percent Risk sizing.


Question 1: Is there a conflict of interest between one's code which uses RISKSTOPLEVEL (our own ATR based stop) and this PERCENT VOLATILITY MODEL which tried to determine its own stop level ?

Question 2: Is the PERCENT VOLATILITY code open source ? If So, where can we find it?



Ak
profile picture

Eugene

#5
Hi Adrien,

1 - The Percent Volatility formula suggests a higher trade size during less volatile marked conditions, and vice versa, a reduced size when volatility becomes higher. You decide if this behavior contradicts with your exit logic.

2 - No, it's closed source. Only 3 PosSizers are included in demo version of MS123 PosSizers.
profile picture

akardar1

#6
Thanks Eugene