to get a feel for how it works, you can change the largest winning and losing trades
allowed and the desired percentage of profitable trades, in cells G2 to G4. To cre-
ate a similar spreadsheet for yourself, type in the following formulas:
In cell G2: Type in the value of your largest loser in percent (in this case
“2”).
In cell G3: Type in the value of your largest winner in percent (in this case
“6”).
In cell G2: Type in the desired percentage of winning trades (in this case
“32”).
In cells E11 to GW11: Type in the value for fin percent, in steps of 0.5 per-
cents, starting with zero in cell E11, ending with 100 in cell GW11.
In cells E12: Type in the value “1,” and drag and fill it all the way to cell
GW12.
In cell C12 to C112: Type in a number series, in steps of one, starting with
zero in cell C12, ending with 100 in cell C112.
In cell B13: Type in the formula
IF(RANDBETWEEN(1,100)<G$4,RAND()*G$3,RAND()*G$2),
and drag and fill it into all cells down to B112. (This formula can be
replaced by typed-in or imported results from real trades.)
In cell E13: Type in the formula (1($B13/$G$2)*(E$11/100))*E12, and
drag and fill it into all cells to GW112.
In cell E113: Type in the formula IF(E112$G6,E11,0), and drag and fill
it all the way to cell GW113.
In cell G6: Type in the formula MAX(E112:GW112).
In cell G7: Type in the formula SUM(E113:GW113).
In cell G8: Type in the formula G6^(1/100).
In cell J6: Type in the formula (G6-1)*100.
In cell J8: Type in the formula (G8-1)*100.
Once this setup is created, you can recalculate the spreadsheet using random
numbers by pressing the F9 button, or calculate the TWRs corresponding to each
f, for a real or back-tested trading sequence. Figure 25.2 shows a chart for how
TWR relates to ffor such a random run, with the maximum allowed largest win-
ner and loser and percent profitable trades according to the values in Figure 25.1.
As you can see from Figures 25.1 and 25.2, the optimal ffor this random series
equals 10.5 percent, which means that to achieve the highest possible TWR, we
should risk exactly 10.5 percent of our available equity in each trade. If we risk
less than that, we won’t optimize our profit potential, as will a risk of more than
10.5 percent. And if we risk as much as 25 percent of our available capital per
trade, we won’t make any money at all, but start losing it instead.CHAPTER 25 Fixed Fractional Trading 297