Leo Zamansky and
David Stendahl tried to overcome large drawdowns Optimal
f by adding a special limit of maximall allowable drawdown.
Secure f solves a task :
Net Profit -> Max (similarly Optimal F) under condition
Max_Drawdown <= Max_Allowed_Drawdown.
The difference between the Secure f and
the Optimal f strategies is that
in case of Secure f the drawdown will be
taken into account. Value of Secure f can
never be higher that the value of Optimal
f.
Formula:
Number_of_shares = (Secure_f * Current_Capital / starting_risk_per_unity_of_assets)/Security_Price
where starting risk = maximal loss at trade(in %).
Example:
Current Capital - 25000$
Security Price - 25$
Max DrawDown - 20% (value of maximal allowed DrawDown)
Secure f- 0.10 (it's calculated on the basis of the historical
data)
Maximal Loss at trade - 50% (it's calculated on the basis
of the historical data)
In this case you can buy (0.1 * 25000/0.5)/25 = 20000/50
= 200 shares
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