Kelly capital allocation table, April 2010

Friday, 16 April 2010 09:21

Table 1. This table gives trading capital allocation according to Kelly Criterion. The allocation depends on the strength of the forecast move, reported as next-current in the system output. The distribution of this quantity for each forex pair is split into four quartiles, and their boundaries are given on the quartile boundaries line of the table. The allocation is the fraction of capital to risk on the protective stop, assuming that this is the only trade submitted. "-" marks the situations where staying out of the market is indicated. These allocations are calculated applying the selective condition of L0 trigger (predicted moves for low, high and close are all in the same direction).


Q1
Q2
Q3
Q4
AUD/USD quartile boundaries -0.00364 -0.00068 0.00193
allocation, % - 2.4 7.0 9.9
EUR/USD quartile boundaries -0.00517 -0.00093 0.00280
allocation, % - - 2.0 9.9
GBP/USD quartile boundaries -0.00661 -0.00099 0.00415
allocation, % - 7.3 16 1.2
USD/CAD quartile boundaries -0.00525 -0.00140 0.00231
allocation, % 11 2.8 - -
USD/CHF quartile boundaries -0.00543 -0.00148 0.00299
allocation, % 4.9 4.4 3.7 -
USD/JPY quartile boundaries -0.5289 -0.1435 0.2512
allocation, % 3.3 - 6.5 -
AUD/JPY quartile boundaries -0.4453 -0.1047 0.2086
allocation, % - - 24 21
CHF/JPY quartile boundaries -0.3680 -0.0535 0.2282
allocation, % - - 5.0 1.8
EUR/AUD quartile boundaries -0.0087 -0.0037 0.0012
allocation, % 1.7 - - 2.9
EUR/CHF quartile boundaries -0.0026 -0.0013 0.0014
allocation, % - 11. 2.1 -
EUR/GBP quartile boundaries -0.00206 -0.00071 0.00098
allocation, % 0.4 0.5 - 18.
EUR/JPY quartile boundaries -0.5657 -0.0547 0.3574
allocation, % - - 11. 8.0
GBP/CHF quartile boundaries -0.00749 -0.00181 0.00411
allocation, % 14. 6.8 - 1.8
GBP/JPY quartile boundaries -0.8555 -0.1742 0.4810
allocation, % - 7.5 5.6 6.4

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