Understanding Kelly Ratio

By Ahmad Hassam

In one of my articles, I talked about the criteria for developing a good mechanical trading system. There are many factors to consider while testing and evaluating a mechanical trading system. The important question is how to develop a trading system, evaluate it and then apply it with real money.

For each trading system that we test, we need to not only know that the trading system is profitable but also whether it is profitable with limited equity swings. We should know does the trading system have excessive drawdown periods?

Three of the most important elements of trading systems are: 1) Clear cut rules for entry and exit. 2) Rules for exiting at profit targets and 3) Rules for exiting at loss targets.

Do losses exceed gains more than what is tolerable in the long run? Does the trading system experience periods of time that result in significant losses that give back those gains when a string of multiple winners and substantial profits accrue?

John Kelly while working at AT&T Bell Labs had developed the formula in 1956 now known by his name. A money management tool used by system traders is the Kelly Formula or Ratio. Most traders do not know when to correctly add on a trading position.

It soon became popular with the gamblers. Gamblers realized its potential as an optimal betting system in horse racing. This formula enabled gamblers to maximize the size of their bets on consecutive races.

Gamblers would use the Kelly Formula to determine how much to parlay winnings into the next bet. Kelly Formula used by many traders to determine how much money to place on the next trade.

Kelly Formula is K=W-[(1-W)/R] where K is the Kelly Ratio percent value. W is the winning probability and it is the probability that any given trade that you make will return a positive amount. R is the Win/Loss Ratio. It is the total positive trade amounts divided by the total negative trade amount.

Kelly Ratio tells you what you should ideally be willing to risk on each trade to maximize your total returns in terms of the percent of your total account. Suppose K is 25% then you can risk 25% of your account on each trade.

Many traders argue that the Kelly Formula gives too high a figure. To be on the safe side you should half the ratio. If K is 25%, you should half it to 12.5%. It means you should not risk more than 12.5% of your account on a single trade.

Kelly Formula can help you in comparing two trading systems and deciding which one is better in the long run. You should look for a trading system that has the highest Kelly Ratio.

Back testing is used to evaluate the historical performance of a trading system. It shows the strength and weaknesses of each trading system in the long run. You can use the back testing results in the Kelly Formula.

So back testing combined with the Kelly Formula can help you achieve in most market conditions, the highest trading profits with the lowest risks. - 23305

About the Author:

Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stocks and forex. Know The Candlestick Patterns. Learn Forex Trading.

FABTurbo Review

By Frank M. Rivera

Forex traders all over the world have been rocked by an expert advisor called FAPTurbo. Traders from all over the world have bought this software and added it to their accounts intending for it to help them on their way to making great profits. So the program has a huge popularity rating, but does it live up to the hype?

The first thing you should know is that the robot costs $149. For an expert advisor that can bring you consistent profits on the forex market, this is a very reasonable price. Other robots on the market charge many times this amount for something that doesn't work quite as good. The low price is part of the reason that people think it might be a scam before they buy into it. They simply can't believe that it's so cheap.

Does the robot actually work? In a word...yes. It works. However, if you're expecting to double your account every single month, then you're probably going to be disappointed. However, for $149, if you could get a robot that would double your account in a year, wouldn't you be ecstatic? I think this is a very reasonable accomplishment for FAPTurbo. In fact, you could probably realistically expect to double your account every 3 or 4 months if your settings are right and you have a good broker.

How exactly does the robot make money? FAPTurbo is primarily a scalper although it does have a long term trading strategy as well. Most people have pretty much written off the long term strategy as it hasn't performed that well. The scalper can trade four different currency pairs including the EUR/GBP, EUR/CHF, GBP/CHF, and USD/CAD.

Each of these pairs has definite advantages. Being some of the more predominant currency crosses, the profitability is often consistent. If you're willing to follow the pricing indicators given by this robot, there should be no need to consider some of the other major currencies or even some of the riskier emerging currencies.

The FAPTurbo seems to be set to trade throughout the pre-Asian trading session when the trading volume is quiet. This gives the predominant currency pairings chosen a very tight range for scalping. The robot does tend to leave trades open a little longer than a regular scalper simply due to the quietness of the market.

If you're considering buying a trading robot so you can make consistent profits time after time, then you're being unrealistic. There's no single piece of software on the planet that is able to accurately predict such a volatile market as the forex market. This means that all software will occasionally incur some losses.

FAPTurbo is a good quality robot that represents good quality for money. For the price tag on the software, you can realistically expect to increase your likelihood of turning a profit with each trade. Have a little patience and take some time to work with your robot. When you're more familiar with the way it works, you'll be pleased with your purchase. - 23305

About the Author:

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Affordable Property Investment In Costa Rica

By Randy Berg

Property investment in Costa Rica is a thriving business today. A lot of people from all over the world are flocking to this country in the urge to buy property. There are a lot of properties that are available at economical prices today which are expected to increase in value in a few years time. This beautiful country which is located in Central America offers a lot of options for foreigners to invest in property here.

Costa Rica is a country much beyond just intoxicatedly lovely beaches, the luscious, green and breathtaking landscape and the majestically enthralling mountains. The beauty of Costa Rica lies in the people who inhabit this beautifully rich country. The people of Costa Rica, generally referred to as "ticos", are warm and friendly by nature. They are also very welcoming and helpful.

Property investment in Costa Rica is on the rise today also because of the various types of property that a person can invest in. Starting with a lovely beach home to a luxurious hotel, there are a number of options for the investor to choose from. Each of these properties is sure to rake in profits in a short period of time due to the increasing exposure to Costa Rica.

The various options that Costa Rica offers for property investment are beach properties, upscale residential homes, farms and mountain properties. Some of the places in Costa Rica where your investment in property will prove worthwhile are in the Central Provinces of Heredia and Alajuela, locations in San Jose such as Escazu and Santa Ana and places like Puerto Viejo, Punta Uva and Dominical.

Costa Rica is one of the oldest and strongest democracies in the Central American region. This country is also considered to be the safest among the Central American countries. Costa Rica is making positive changes in order to lure investors to invest in property here. The infrastructure is developing rapidly and now Costa Rica has good roads, good Internet connectivity, good air travel facilities, banks, schools and universities. The economic policies are also liberal which makes it convenient for the investor to purchase property here.

Property investment in Costa Rica is a great thought; however, certain precautionary measures have to be borne in mind in order to avoid getting the raw side of the deal. The most important aspect is to understand and accept the fact that the Costa Rican real estate is a two tiered market. The Costa Ricans quote different prices for the same property to the "ticos" (natives) and the "gringos" (foreigners). Most of the ticos have an assumption that the gringos are all very rich people and hence they tend to quote a price nearly twice the price quoted to a tico. Hence, you need to negotiate well with the ticos to ensure you get a good price for the property.

Though Costa Rica offers a lot of benefits of living here, there are a few things that you need to keep in mind while planning to invest in property in Costa Rica. Costa Ricans tend to think that "gringos" or foreigners who are investing in property in their country have a lot of money stacked in their bank accounts. Hence, the real estate in Costa Rica is a two tiered market. The "ticos" (native Costa Ricans) quote different prices for the same property to "ticos" and "gringos". Gringos are most often quoted a higher amount. This is one important point to bear in mind while investing in property in Costa Rica.

Costa Rica property investment is lucrative; however, the person who needs to invest in property in this country must be well versed with the local laws of this country. This is needed to ensure that you can get the property completely registered against your name and get 100% ownership rights. - 23305

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Global Macro Investing in the BRIC's

By Jesse Baruch

Brazil, Russia, India, and China are collectively known as the BRIC's. The paper in 2003 by Jim Oneil entitled The Path to 2050 brought the BRIC's to the forefront of emerging market investors. The idea is that by the year 2050 the BRIC nations will be as large and powerful if not more then existing super powers. Based on economic and demographic forces the paper might be right.

Now that these nations have embraced capitalism and started to throw out corruption they are able to better compete for investment capital with other nations. Due to this and the fact that they have huge and growing populations along with large natural resources and you have a good chance for a big move on their way to power and influence.

Long called the next great growth story it looks like this time Brazil might actually pull it off. It has a large and stable financial system as well as some huge oil and gas reserves. In fact it is one of the largest non OPEC oil nations in the world. Brazil is also one of the larger natural resource countries with millions of acres of farmland and forest. Basically Brazil now has the infrastructure to pull off the great feat of leaving the emerging markets for the developed ones.

Russia is next and like Brazil has huge oil and gas reserves and resources. In addition to natural resources Russia also has a very educated population with many scientists. The only thing that Russia needs in order to further progress is to fully purge itself of corruption that is fairly rampant in the government, But hey when your leader is a former KGB agent what do you expect? Anyways if they can get past the Putin issue then they will become one of the most powerful economic forces in the world.

India has one of the largest populations in the world and has a large educated populations that speaks English. Because of this they are the kings of outsourcing. Have you ever called up customer service and gotten an Indian for Dell, Apple, Etc? Due to their educated population they are also quickly becoming legitimate leaders in technology. After having been laggards in the tech space the last ten years has seen India become a major player in the global markets.

China is last but not least having recently passed up Japan as having the second largest stock market in the world behind the United States. Long a communist nation China now takes the soft line in politics and instead is focused on improving their economy and the standard of living for its citizens. There are obviously still may challenges that lay ahead of China and the rest of the BRIC nations but they appear to be overcoming them and getting rid of the old guard of corruption and instead becoming huge economic powerhouses. - 23305

About the Author:

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A Sneak Preview Of The Hector Trader Forex Training

By Terry Law

As a trader, I know there are tricks of the trade and wisdom that can only be learned through speaking with long time traders. Learning from their experience make me a better trader. I recently attended the Hector Trader Forex Trading Course and would like to share my impression of the experience.

I found Hector Trader by searching through Forex Trading blogs. His blog about his full-time trading career is very professional in its presentation and the videos he has made are high quality.

Hector's accent was a distraction when I first began to listen to his blog's free on-line videos. However, when I was able to ignore the accent, I realized that the information he was sharing was logical and sensible. So I continued to listen. He sticks to the topic at hand, which I really appreciated, explaining charts in an in-depth and logical manner.

Hectors British accent began to grow on me after a while. His double-oh catchphrase particularly began to stick in my mind. I signed up for his training course and was impressed the moment I logged in. Dozens of videos were available to me now! And I could take my time with them since the flexibility of an online course lets me work on my own schedule.

Like any good system, Hector's seems simple. But that doesn't make it easy to master. Working through the videos, which provide real life scenarios are very helpful. And testing what one has learned from each video is also very important, to gauge how much information has truly been learned.

There are also written lessons and other materials that are supplements to the videos. Hector makes these usually dry reads humorous and easy to to follow. Hector also provides the Metatrader indicators that go with his system.

I have already used a key learning from the Hector Trader Forex Trading Course, which has affected three of my last winning trades in a positive way. After a break, a trader should wait for price to retest a level, putting him or her in a lower risk bracket than he or she would be otherwise.

Hectors course is well within the reach of most aspiring traders, and a great value for the price. I highly recommend this Forex Trading Course as a place to start or continue your trading education. - 23305

About the Author:

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