Hi Francesco,
I'm assuming that the following mechanical portfolio system is referred as "turtles":
turtlerules.pdf I didn't comprare their sizing method with OptimalF, but I find the topic very interesting. I'll put down my thoughts here.
Realistically, I can only trade like Turtles if I trade a portfolio, otherwise drawdowns are too deep and long. Turtles deployed fixed fractional position sizing (risking 2% of account - one "unit" - placing hard stop based on volatility).
I beleive that Vola and OptimalF are not opposites to choose between. I still can place my hard stop based on volatility and then let OptimalF decide how many % of account to put on risk.
The above statetement about "fixed fractional" is oversimplified, of course. Turtles added contracts (up to three units more) if trade went profitable; they had rules telling how many units are allowed at maximum. I'm not going to repeat them here, it was all about correlated markets.
If I want to trade like Turtles but at OptimalF, I need to define which systems the portfolio consists of. Those would be one per market per long/short per which-unit-is-it (initial, second, third, fourth).
Going further, I would represent Turtles' rule to only enter a new trade after a loosing trade (paper or real one) as pairs of systems in the portfolio: one for trading after loosing trades, another one for trading after winning trades. If it's indeed better to skip a trade after a winning one, OptimalF will yield a zero value for the "after winning" system.
Last not least, if I'm scared by deep drawdowns at OptimalF - rather than trading at a fraction of OptimalF instead of full OptimalF, it's better to split the whole equity into passive part and active part (
another post ).
