All about F: using a spreadsheet to maximize gain. (finding the optimal f using Microsoft Excel 3.0) (Trading Techniques)

Futures (Cedar Falls, Iowa), September, 1992 by Bergerson, Karl; Burke, Gibbons

What is the optimal number of contracts to trade for a given equity level? We illustrate the answer using a popular spreadsheet program.

"Don't overtrade," the trading wizards warn us. "Keep your wager small," they say, usually just after they have told you to "Follow the trend" and "Hang on to your winners." This is faultless advice to be sure, but how does a trader know when he is overtrading?

Put on too big a position and a series of losses will wipe out the account. If you are not aggressive enough, your winners will have no appreciable effect on total equity growth. A balance must be struck between maximizing the return and minimizing the risk of ruin, but finding a mathematically correct way to do so has not been easy.

Ralph Vince, a...

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