Post #1357 by DrBob2 on the Mechanical Investing board

Investment Strategies / Mechanical Investing

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Congratulations Dr Bob!

Thank you.

I'll look into the optimal Kelly criterion size.

If I ran the numbers correctly, then the optimal position size was 0.23 over the last seven years. Going with a 20% position size (and calculating that at the beginning of each year) the original $35K pot would grow to $1048K -- considerably larger than B&H.

Here are the number for the Kelly criterion calculation. Hopefully I did this correctly.

% wins = 36%
% losses = 64%
Average gain = 216%
Average loss = -45%

W = 0.36
(1-W) = 0.64
R = 216/45 = 4.8

K = W - (1-W)/R
K = 0.36 - (0.64/4.8) = 0.23

DB2

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