Sizing capital from degraded records and volatility

The capital-planning sequence

The archive uses a reduced profit-and-loss record to decide whether a timing method is usable for capital planning. Monte Carlo simulation then tests each starting stake against a stated profit goal. Volatility position sizing and historically implied risk keep the loss decision bounded before entry.

When a timing record is usable

A timing method is treated as usable for capital planning only after its profit-and-loss record still looks positive once results are reduced for a short sample and for the number of control rules.

When two simulated records show the same profit over the same number of trades, the record built with fewer control rules is treated as the more credible candidate for later use.

Testing stakes with Monte Carlo simulation

Monte Carlo simulation redraws trades from the historical profit-and-loss list with uniform random numbers so each capital stake can be tested thousands of times against a stated profit goal.

Risk of ruin and required starting capital

The chance of remaining solvent is estimated as successful goal-reaching runs divided by successful plus unsuccessful runs at that starting capital.

Required starting capital is the stake at which the simulated probability of reaching the goal stays inside sampling error and remains high enough that the account is not expected to fail first.

Volatility position sizing

Position size is scaled to a funded base unit at a neutral volatility reading, then reduced toward a single unit at extreme three- or four-standard-deviation readings so loss exposure stays bounded before entry.

Larger size is reserved for timing signals that occur at extreme volatility readings, and size is cut when the same signal appears near the opposite extreme.

Exposure from historically implied risk

Market-based exposure is set inversely to historically implied risk so a trade is not enlarged just because more contracts would raise the dollar outcome of a well-timed move.