No. of Recommendations: 4
YES! this could be a potential CGAR booster, I'd like to have a test
Well, a back-test doesn't hurt but I don't think this will work
Hey Are you kidding? I'll stick forever with equal dollar amount
Who the hell is Van Tharp anyway?

Click here to see results so far.

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No. of Recommendations: 6
Yeah, I read Tharp during my TA phase and tried a number of his recommendations including the percent volatility model. Never could come close to the improvement he mentions vs a simple equal dollar strategy. (I was testing stocks). As for the book, I thought it was the greatest when I read it, but as I said I never could reproduce his results. Also, some months ago David Mobely who wrote the forward to the book, and is (was) the star pupil of tharps seminar series was arrested and confessed to running a ponzi scheme and bilking investors out of hundreds of millions of dollars. So the question is, if Tharp knows what he's doing and Mobely is his protege, then why does Mobely need to scam people to make a buck? Why can't he just use his alleged knowledge of the market and invest the money legally.

Jeff
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Jeff said:
So the question is, if Tharp knows what he's doing and Mobely is his protege, then why does Mobely need to scam people to make a buck? Why can't he just use his alleged knowledge of the market and invest the money legally.

Yes I heard about that, When it comes to money and wealth some people just don't have enough. But the fact D. Mobely had troubles with justice doesn't mean Mr Tharp's book or ideas are wrong. In fact Mobely just wrote the intro. Tom Basso helped Tharp a lot more at developing this book.

Regarding the percent volatility strategy, in the book
Tharp says it was tested using some software called Athena. Athena, actually, seems to be a commercial software tool.

This kind of position size, at least in theory, it makes a lot of sense.
Let's say you have $10.000 and want to invest in two positions. One position has an average daily volatility of $10 per position and the other one has $1. If you invest equal dollar amounts you're gonna have one position with big profits( or losses) and the other one with almost no movement ( assuming no volatility change happens).

I you invest with some kind of volatility driven positioning you're going to equate both investments and your bets will have a kind of equal behavior. You could, even, decide which CGAR you wanted ( and which maximum drawdawn you're likely to admit)

FSC


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No. of Recommendations: 1
In fact Mobely just wrote the intro.
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No, he's more than that. I think protege is a better term. And as a graduate of Tharps $30,000 series of courses he doesnt inspire much confidence in me. Tharps courses in part deal with psychological issues that impair effective trading. Maybe Tharp forgot to tell him not to steal from old people.

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Regarding the percent volatility strategy, in the book
Tharp says it was tested using some software called Athena. Athena, actually, seems to be a commercial software tool.
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Correct, Athena is also developed and sold by Tharps company. I hope you arent insinuating that just beacuse its software then the results are valid.

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This kind of position size, at least in theory, it makes a lot of sense.
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Perhaps, but in every TA book you will find the authors pet indicator and an application to prove its usefulness. 99% are curve fit. In Tharps case the study was done on 10 commodities for ten years. Not bad but you need know more, like were the commodities picked randomly or are they the ones that gave the best performance. How does it perform on 10 different commodities? What about stocks?

Anyway my biggest rap on Tharp is that I couldn't reproduce his results. If you can, more power to ya.

Jeff



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No. of Recommendations: 2
Tharps courses in part deal with psychological issues that impair effective trading
Right, that makes me wonder too... The question is if this is a sign that his psychological lessons to "take control of your life" aren't effective. I think, statistically, a single sample is not relevant to make a judgment...

I hope you aren't insinuating that just because its software then the results are valid.

No, I just mean they used a kind of back-test software ( Athena) that takes its data from other programs such as Trade Station or Metastock: They had only to build the positioning algorhtms. It's simpler then having to build all by themselves, and, less prone to errors.

99% are curve fit

I cannot see how curve fitting would be relevant for this test.
As Tharp says, the very same signals are the input for all the positioning strategies. Curve fitting is relevant as entry/exit signals, but once those signals are set, the difference in results has to be due to position sizing.

Anyway, I've just downloaded Sux spreadsheet with daily data of RS-IBD. So I'm thinking in how to use this excellent database to perform this test using RS-IBD screen.

I have to think about a way to define the size of the position as a percentage of the total investment. So here it's best to think in terms of relative volatility. I mean, the volatility of a position in terms of the total volatility of the portfolio.
I think the best way is to define the volatility in every rank , first, in terms of volatility per dollar invested (VRi). then take the inverse of this figure

IVRi=1/VRi.

We define TIV as:

TIV= sum{IVR1...IVRn}
where n is the number of positions you take on the screen.

Finally, if C is the capital of your trading account, then, the position for every rank Pi will be:

Pi= C*IRi/TIV

The other question is HOW should we define volatility.
I mean what's the right time frame. short term or long term?. Definitely, using Sux database it has to be short term, but maybe the best way is to look at longer term volatility. Is it a better way to get the actual implied volatility figure used to get option prices ?

Ideas are welcome

FSC

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