Ralph Vince Optimal F for Trade-Based Position Sizing

Summary

This document explains how the script estimates Ralph Vince’s Optimal F from a strategy’s closed trades. It records profit or loss per contract, scales each result by the largest loss, then evaluates a grid of sizing fractions from zero to one. For each fraction it multiplies the trade-by-trade growth factors to estimate terminal wealth relative and selects the fraction with the highest historical compounded growth. The script displays the growth curve and reports the selected fraction, growth multiplier, maximum loss per contract, and an equity-based contract estimate.

Optimal F represents the fraction of equity at risk relative to the largest historical per-contract loss, rather than the fraction of equity used as the position’s nominal value. The notes describe full F as potentially aggressive and mention half F as a more conservative comparison. The example strategy uses SuperTrend entries, but the sizing analysis depends on the strategy’s trade record. The estimate is historical, uses a coarse search grid, and does not constrain drawdown or establish that future losses will resemble past ones.

Key ideas

• Optimal F selects the sizing fraction that maximizes compounded growth across the observed trade sequence.
• Each trade’s result is normalized by the largest historical losing trade per contract.
• The contract estimate scales current equity by the selected fraction and divides by maximum loss per contract.
• Full Optimal F can produce large fluctuations and drawdowns, so fractional values may be worth comparing.
• The historical optimum does not impose a drawdown limit or guarantee future performance.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.