Thread: Kelly Money Management

Already done.

There might be an issue when you have a loss as your first trade. Cant divide by 0.

also the more trades the better it works. If you get a loss in the first few trades the lots can increase greatly.

Maybe just make the first few trades with a fixed lot size to overcome this?

nice job arbus... you're an asset to this forum pal!

Hi Funyoo

There is pt not defined and function nd is missing in this post. Could you post it?

Originally Posted by funyoo

b = win/loss ratio,
p = % of winning trades,
q = % of losing trades (=1-p),
K = percentage of the balance to risk per trade.

Kelly formula : K = (b * p - q) / b

The kelly money management is supposed to help to recover from previous losses.

More information : http://www.racing.saratoga.ny.us/kelly.pdf

In the extern parameters, add :

Code:

extern double initialrisk=0.1;
extern int mintradeskelly=10;
extern int maxtradeskelly=50;

extern double stoploss=50;

After the extern parameters add :

Code:

int lotsize;

Add in the init function :

Code:

if(MarketInfo(Symbol(),MODE_MINLOT)>=1){lotsize=100000;}
if(MarketInfo(Symbol(),MODE_MINLOT)<1){lotsize=10000;}
if(MarketInfo(Symbol(),MODE_MINLOT)<0.1){lotsize=1000;}

Kelly function :

Code:

double kelly(){
   int count=0;
   double countprofit=0;
   double countloss=0;
   int countpve=0;
   int countnve=0;
   
   double b=0;
   double p=0;
   double q=0;
   
   double k=0;

   if(OrdersHistoryTotal()>0){
      for(i=OrdersHistoryTotal()-1;i>=0;i--){
         OrderSelect(i,SELECT_BY_POS,MODE_HISTORY);
         if(count==maxtradeskelly)break;
         if(OrderMagicNumber()==magic && count<maxtradeskelly){
            count++;
            if(OrderProfit()<0){countnve++;countloss+=OrderProfit();}
            if(OrderProfit()>=0){countpve++;countprofit+=OrderProfit();}
         }
      }
      if(countloss!=0 && count!=0 && countpve!=0 && countprofit!=0){
         b=countprofit/countloss;
         p=countpve/count;
         q=1-p;
         k=(b*p-q)/b;
         //Print(" "+k);
         if(count>=mintradeskelly)return(k);
      }
   }

   return(initialrisk);
}

Standard MM function :

Code:

double mm(double risk,double stoploss){
   double lot;
   if(stoploss>0)lot=AccountBalance()*(risk/100)/(stoploss*pt/MarketInfo(Symbol(),MODE_TICKSIZE)*MarketInfo(Symbol(),MODE_TICKVALUE));
   else lot=nd((AccountBalance()/lotsize)*0.01*risk,2);
   if(lot<MarketInfo(Symbol(),MODE_MINLOT))lot=MarketInfo(Symbol(),MODE_MINLOT);
   if(lot>MarketInfo(Symbol(),MODE_MAXLOT))lot=MarketInfo(Symbol(),MODE_MAXLOT);
   return(lot);
}

Replace lots in the Ordersend functions with :

Code:

mm(kelly(),stoploss)

Here's a little upgrade I made to the formula

if(KellyMinusRisk)
{
k=(((100*(p-q))/count)+100)*0.5*0.01*Klots;
}
else
{
k=((((100*(q-p))/count)+100)*0.01*Klots)+Klots;
}

Klots = lots (weather using money management or not)

KellyMinusRisk - if true- lots are deducted when a loss occurs.
if false lots are added when a loss occurs.

The "kelly" lots are calculated between 0 and 100% of the lots being used.
So with (KellyMinusRisk=true)
100% wins the Kelly lots = Lots.
with every loss the lots drop a percentage of the lots.
100% losses the kelly lots=0.01 lots.

(KellyMinusRisk=false) the opposite is true. the more the losses the greater the lots (Lot size + up to 100% of the lot size)

I have been testing it against the regular MM and found with KellyMinusRisk = false it is giving better results.

eg
Regular MM
30.6%DD
PF1.54
Profit=69003

KellyMinusRisk = false : maxtradeskelly=15
29.51DD
PF1.62
Profit=87150