The following charts show a scaled-down version to 100k and a 1M version of my variation to this theme. Both operate on the same principles and conditions as the two prior charts. It shows that returning to the initial capital to 1M simply added a zero to the equity as displayed in the second chart below. Now, that final equity number is a big number. Obviously, this is pushing toward the limits, but still not beyond since the strategy did not blow up and could do even more if requested (one path is to increase a single number).

**100k as initial capital**

**1M as initial capital**

The performance difference, compared to the simulation in the previous post comes from trading more for a higher average win per trade which came in at 15.70% compared to 14.45% in the prior test. This might not appear as much, but trade by trade, the added profits are compounding repeatedly and it does make a difference even if the win rate was down a little to 56% versus 59% in the previous simulation.

Used @Vladimir's version 2.3 as template. Added and discarded stuff, changed things here and there, all relatively easy to do. Most of it to force the strategy to trade more and at a higher profit margin. I pushed on the machine to reduce inter-trade delays while using modulated leverage in order to find the strategy's trading limits. I think they are in sight. It is where I usually add more protective measures knowing the overall return will be reduced. Afterward, I will add more gaming procedures.

The changes made are ordinary. Yet, we have the charts above. There is no magic there. The modifications were incrementally small and not drastic changes. Nonetheless, the code was considerably altered. These changes did respect the math of the game. If you increase by any means the number of trades and the average profit per trade, overall profit will simply rise.

Due to the very structure of this trading strategy, it technically cannot go bankrupt. Its bet size is proportional to the ongoing equity. When the strategy loses money, the bet size is reduced, and likewise, when the strategy makes money, bets get larger. Notwithstanding, you could still lose most of the strategy's equity to the point where no trade could be executed due to insufficient remaining funds. All you would lose would be the money put into the strategy.

So, how would you play this thing?

Take 10% or 20% of your portfolio and put it in this strategy as the high-risk part of your portfolio. Keep the rest for a more mundane portfolio with an expected secular outcome (say ~10% or better). Buy something like QQQ or SPY and hold for the duration, it should give you something near the expected long-term market average.

**The Math For Such A Scenario**

First, consider you lose your speculative bid. Net result: 90k ∙ (1+0.10)^20 + 10k ∙ 0 = 605,475 which is equivalent to 100k at 9.42%. The effective portfolio risk should be valued at this 0.58 basis points loss. Thereby risking less than 1% return of your long-term expected market return. Technically, risking not making 67,275 over those 20 years which you were also at risk of not making.

You win your bet, but at a lesser rate than the chart above (it is at 125.95%). You get your 10% on 90k plus the outcome of your long-term speculative bet. The math:

90k ∙ (1+0.10)^20 + 10k ∙ (1+0.80)^20 = 1,275,429,097. That is equivalent to a 60.43% portfolio CAGR for the 20-year period. If your bet turns out at a higher rate, say 0.90, then the math says: 90k ∙ (1+0.10)^20 + 10k ∙ (1+0.90)^20 = 3,759,602,821 which is a 69.34% equivalent CAGR on the $100k invested in this portfolio.

For the 80/20 mix, you would get: 80k ∙ (1+0.10)^20 + 20k ∙ 0 = 538,200 for the losing scenario. This is equivalent to an 8.78% CAGR on your 100k. Whereas, with a winning bet:

80k ∙ (1+0.10)^20 + 20k ∙ (1+0.90)^20 = 7,518,532,892 or a 75.31% overall portfolio CAGR.

Even if some think this is impossible, the above charts show nonetheless that it is doable, it is feasible, and it is executable. Of course, the future will be different. But, you do have a wide margin of error. Which game do you want to play? Can you risk 1% less on your future CAGR for a 50%+ return on your overall portfolio? Naturally, should you embark on such a journey, be ready for a wild ride. On the other hand, for your comfort, it is all on auto-pilot...