I came across some interesting information about the Kelly Formula that I think will be useful to those of you who struggle with the concept of position sizing. I will continue to include position sizing articles each month as it one of the most important aspects of any investment strategy, particularly the trading strategies that we follow. In my opinion, this is the most critical concept you need to tackle as a trader or investor.
Why is it critical? It is critical because the question of "How much should I allocate" determines your risk and your profit potential.
Some of you might find the Kelly criterion/strategy as a helpful guide to deciding what position size fits your investment goals.
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Well, in spite of repeated warnings from ol' Big Nose and Blubber Butt, the mere fact that the entire European continent seems headed toward a complete shipwreck isn't mattering a tinker's cuss. The Big Resolution this weekend, which G-20 demanded be finished by TODAY, amounted to little more than a bunch of dirty goblets and dishes that the catering had to deal with.
So at this point the promise is that by Wednesday – Honest! – – Honest Injun!! – – everything will be, like, totally figured out.
It's really pissing me off, beause until the Grand Plan is announced, I'm tying my hands. There is no way I want to get aggressively short with this Stupid Looming News on the horizon, which probably will be the shortable event of the year.
But until then, we can all gasp in awe at the absolute devastation being wrought as I'm typing this. There is not just one pip but multiple pips being shredded from the Euro! Hang on to your hats, everyone!
Edit 10/23/11 @ 6:09 AM: The very first feedback I received on this post was from an intelligent and thoughtful reader who notes that "I don't see you talking at all" in response to my "what the eff are we talking about here?" at the end. The mailer writes that it is all about conversing, asking questions and challenging the status quo and asks a question of his own about what I was hoping to find, the promised land? He saw me pointing a finger and poking fun.
So here is my answer: I wanted to find some of history. I wanted to find something different. I wanted to find someone talking about money printing and inflationary disenfranchisement. That is what the whole Fed shtick was about in the video (I admit the helicopters that flew over the Fed had me thinking about making tin foil hat jokes and got me unfocused). I did not want to find Kumbaya and bongos. I suppose I wanted to find something more focused on a message of the '99%' being so many of us stuck in the middle of a triad of the Democrat machinery, the Republican machinery and the Corporate machinery. With a side of Federal Reserve thrown in for good measure.
When the Euro was skyrocketing as the US Dollar was falling I wrote many articles calling attention that it had nothing to do with the strength of the Euro, but had everything to do with Federal Reserve policies crushing the intrinsic value of the dollar, making stocks appear more valuable. (appear is the operative word) I also wrote, and spoke on the subject concerning the Euro. I believed then as I believe now that the unprecedented rise was not due to anything more than a temporary correlated move.