@ Maz – Many thanks for your post, it is an excellent bit of useful code. I had wanted to employ this kind of management but was not proficient enough at the time to develop it.
Another way of assessing these statistics is to also look at maximum streaks – ie if in the past the streaks usually end at 5-6 then it may be an idea to actually reduce your position sizing past this point as there may be a higher probability of the streak ending. Therefore, in your example above, you would increase after 4 wins and reduce (or even go to zero) after 6 wins. Only backtesting your particular strategy would show if this proves to be more effective. This is perhaps more suited to strategies that are looking to pick the “meat” of the trade rather than squeeze out every last drop from the edges of the trend. For the latter situation of course you can still employ the above as long as you have a competent stop loss system in operation.
Also, if your strategy is one that has a reasonably high win rate, you may choose to look at the losing streaks. If they usually end at 2-3 then at your next trading signal you would increase your position by +1 as its more likely that your next trade will be a winner. Note that in this situation you would probably have to build in some sort of system cutoff (maybe at 5-6 losses) in order to avoid a scenario where the losing streak continues for a long time (thereby also creating new statistical maximums).
The better way to employ this would be perhaps to run two separate codes for long and shorts so as to not introduce anomalies that are only unique to one or the other and risk “cross-contamination” of streaks. Or you can do this within one code as long as you separate the streak calculation of the shorts from the longs. Eg so if your next signal was a long, the code would look at the long streaks section to decide how to position size etc. Again, only backtesting your strategy would show if this is of any value to consider.
All this of course (as Nicolas pointed out) relies on having a decent history and statistical data set (of streaks) so that you can rely on it effectively as your backtesting would need a reasonable number of trades and over a long time period.
Great topic, I look forward to opinions from the rest of the forum. Thanks again.
