How pattern strength metrics can inform allocation decisions.
The Framework
| PCS Score | Win Rate | Pattern Strength |
|---|---|---|
| 70+ | 80%+ | Very strong historical pattern |
| 60-70 | 70-80% | Strong historical pattern |
| 50-60 | 60-70% | Moderate historical pattern |
| Below 50 | Below 60% | Weak historical pattern |
Past performance does not guarantee future results.
Kelly Criterion - A Statistical Concept
Theoretical optimal allocation = Win Rate - (Loss Rate / Reward:Risk)
Example:
- Win rate: 75%
- Average win: +4%
- Average loss: -3%
- Kelly: 0.75 - (0.25 / 1.33) = 56% of capital
Many practitioners use half-Kelly as a more conservative approach: 28% allocation
Scaling Approach
Some market participants spread entries over time:
- Day 1: 50% of planned position
- Day 3-5: 30% if direction aligns
- Day 7-10: Final 20% on any pullback
Portfolio-Level Considerations
| Total Seasonal Positions | Common Allocation Range |
|---|---|
| 1-2 positions | 30-40% each |
| 3-5 positions | 15-25% each |
| 6-10 positions | 8-12% each |
| 10+ positions | 5-8% each |
Key Principle
Risk management is about understanding that even the strongest historical patterns can and do fail in individual years.
This is statistical analysis of historical data, not investment advice. Always do your own research.
Generated with SeasOptima.
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