The Finance Book Club

Market Analysis
“I record the pulse reading on the exact half hour by drawing a box around the indicators. Then I overlay a red or green arrow between each boxed set to reflect whether the New York Composite was up or down from the previous half hour and by how much.

This exercise forces me to focus on how the market is trying to move.”

Services: likely also all defunct. It includes things like daily faxes, etc.

10 day EMA is his favorite indicator to determine major trend.

Follower of Terry Laundry.

“Whenever the New York Composite is above the ten-day exponential moving average, I draw it in as a solid green line. When it dips below, the line turns solid red. When you’re trading above the ten-day, you have the green light; the market is in a positive mode and you should be thinking buy. Conversely, trading below the average is a red light. The market is in a negative mode and you should be thinking sell. That doesn’t mean you should never buy when you have a red light, but if you do, it is critical that you have an extremely good intellectual reason for taking that position.”

When price is right at the EMA that’s when it offers the most profit potential but also the most risk. A crossing could show a trend starting, but the EMA can also act like a barrier and reject price.

1. Write down EMAs for S&P500, NYSE comp, OEX, XMI, bond, Eurodollar, S&P Futures
2. Pick an entry point and a risk amount; looking for turning points, “inflection” points
3. Use channel lines and oscillators to pick levels
4. 120, 60 and 30 minute time frames

Bands are 1% above and below the 10 period moving average. When price is close to the lower bound, buy, upper, sell.

Marty then goes into a discussion of how to calculate the EMA. Like he ever does that.
In fact, reading the book I get the distinct impression he rarely does any of this. He is a seat-of-the-pants cowboy who reacts by instinct.

Marty then describes how he trades stocks but most of the methods are pre-computer era. He gets chartbooks sent to his house by mail. He updates them by hand.
He prefers to do things by hand to get a feel for things.

He manually draws support and resistance lines on these charts, faxes them to his assistant who inputs them into her computer.

He uses OEX and SPX options for longer-term plays. Sometimes bond futures when there’s a ‘strong technical setup’.

He scalps for a point or two on 10k-20k share positions.

He looks for temporary weakness in strong stocks to buy, which is why drawing all his trend lines and writing the support levels out is so important. His assistant sets alarms on the computer with the support list; if the price dips into the support area, she notifies him and he looks to buy on a green light with a good looking chart.

Uses 4 monitors. His assistant prints out the 20 charts he looks through. Again he draws trendlines on these by hand.

Then he takes index cards and records average buy and sell levels. These ‘pregame’ notes gives him courage during the heat of battle.

Program Trading
Marty calls it ‘Nintendo Vegas’ because it produces 15-20% of daily trading volume on the NYSE.

After the 1987 crash it didn’t take long for greed to cause the players to come back to ‘the casino’.

Money and power always prevail on Wall Street.

Know the trend of the market and wait for these technocrats to drive the market averages deep into your channel lines.

“Lie in wait until these people conduct their mindless malevolence (LOL) and you counterattack with a contrary position, always using a well-disciplined stop loss.”

The great challenge is to continually adjust your skills to ever-changing market conditions.

“I am always intensely searching for patterns, setups, recurring themes, no matter how small, to help further swing the odds in my favour on a given trade.”

Chart gaps
If they aren’t filled in 2-3 days it’s a strong signal to take a position in the trend direction.

3 types of gaps

1. Breakaway gap - coming off a base - very bullish
2. Continuation gap - happens after a move has already been made
3. Exhaustion gap - indicative of a reversal But Schwartz doesn’t explain how to recognize it! I assume it’s near his band edges.

The market often is stronger the last day of the old month and the first four of the new, as new money flowing into mutual funds are invested into stocks. This is caused by cash infusions into mutual funds.

3 Day rule
After an Intel or Microsoft has had a large 3 day move you don’t want to get in on the mature trend.

“The first day the smart people are moving, the second day the semismart people are moving, and by the third day, the dunces have finally figured it out. If the stock has bad news and it sells down, by the third day you may want to start looking to buy it because the bad news probably has been fully discounted. ”

 

1. Marty Zweig Put/Call Ratios
2. Contrarian reactions to news
3. New Highs/New Lows
4. Up Mondays
5. Market calendar probabilities
6. Option expiration dates
7. Half hour program trading; noontime rallies; highly volatile last half hour
8. Taking out the stops of highs/lows in ranges

These are tried and true patterns that have not withstood the test of time. Get the book if you’re curious though.

Take the first trade after a hiatus slowly to adjust to the rhythms of the market. Make your first trade ‘an intellectual one, not an emotional one.’

Whenever your worst fears are not realized about a trade and the market is letting you out better than you expected, it is not just good luck. Rather, your position is most likely correct and should not only be held but perhaps added to.

Schwartz quotes Pogo. One of my favorite lines.

Divorce your ego from the trade. Stop trying to will things to happen in order to prove that you’re right. Listen only to what the market is telling you now. Forget what you thought it was telling you five minutes ago.

Schwartz then goes through his typical day, which is of limited interest. Except that he uses a checklist, like all good pilots. It’s laminated and it says this:

1. Check charts and moving averages prior to making a trade—the moving averages work better than any tool that I have. Don’t go against them.
2. Are we above or below my moving averages, i.e., in positive or negative mode?
3. Are we above or below a dominant trend line?
4. Has recent price action taken out previous highs or lows?
5. Is the MTO (Magic T oscillator) in positive or negative mode?
6. Always ask before taking a position: do I really want to have this position?
7. Always know the amount I’m willing to lose before taking a position. Know the uncle point and honor it.
8. After a very profitable run of trading, reduce the position size.
9. After a successful period, take a day off as a reward.

“Today the exchanges are just like casinos. They want you playing around the clock. These extended hours can make you old in a hurry.”

And that's it! Another book, in the archive. I won't do a long-winded review except I'll say it was worth the time, for sure.
Footnotes
Next: The Trading Game by Ryan Jones.

The Trading Game - Playing By the Numbers to Make Millions
by Ryan Jones

I selected this book because it was frequently referenced by other traders when they talked about money management. It seems like this is THE book to read if you want to know everything about money management in trading - which is itself often referenced as the most important and most neglected aspect of trading.

Are you ready to crunch some numbers?! I am!

Preface

1. We live in an age of instant gratification - fast food and quick fixes
2. This attitude explains the rise in interest in trading commodities and futures
3. This mentality ensures that failure is all but certain
4. Failure rate is ‘somewhere around 90 percent’ meaning that 90% of traders stop trading while showing a net loss
5. Getting rich quick is improbable

Chapter 1 - Why? What? Where? When? Who? How?

1. Money management is misunderstood. It’s not boring like accounting. It’s ‘truly exciting’.
2. No other knowledge can ‘ignite’ an account faster than MM
3. A common dream is to get $1M in trading profits in a lifetime
   1. Most traders don’t expect to reach it in < 20 years unless they are starry-eyed noobs
   2. However it can be done in five years using conservative MM

You don’t need $1M to reach $1M. You only need to build profits of $100k.

“A person who trades a single contract, option, or set number of shares of stock and makes $100,000 at the end of five years, instead could make $1 million by implementing proper money management or increasing the risk on each trade.”

1. $100,000 in profits during the next five years.
2. $20,000 profits per year for the next five years.
3. $1,667 profits per month for the next 60 months.
4. $384 profits per week for the next 260 weeks
5. $75 per day on average for the next 1,320 trading days.

3 ticks/day in the S&P
< 3 ticks per day in bonds
$0.75 in stock trading 100 lots per day
6 ticks/day in the currency market
2 ticks/day in the coffee market

For those who trade a basket of currency markets such as Swiss franc, Deutsche mark, Japanese yen, British pound:
1. $20,000 per year in profits for five years.
2. $5,000 per market per year for the next five years.
3. $416 per market per month for the next 60 months,
4. $96 per market per week for the next 260 weeks.

10 stocks of 100 lots each:
1. $100,000 in profits over a five-year period.
2. $20,000 each year for the next five years.
3. $0.37 per stock, per week.
4. $375 per week total from trading 100 lots.

1. MM takes the trader past ‘the point of no return’
2. If you make $40k over 2 years and then lose $40k over the next 2 years, your return is $0 after four years.
   1. If you’d used proper money management the $40k could have grown to $200k.
   2. Then in the losing period you could have protected as much as $100k.
   3. The point is that after reaching $200k the account was in a position to withstand just about any size drawdown (using proper MM).
   4. The difference between $100k and $0 is MM.

3. MM is responsible for 90% of the $1M profits over five years
   1. It isn’t the system.
   2. It isn’t the market being traded.
   3. It’s not cosmology/luck.

What MM is and is not

1. Larry Williams says in ‘Definitive Guide to Trading Futures' (vol.2) that MM is the most important chapter in the book
2. MM is not about stop placement
3. MM is about how much of your next trade is put at risk
4. MM has 2 categories
   1. Proper
      1. Takes into account risk/reward factors
      2. Discounts anything that can’t be proven mathematically
      3. Doesn’t care about entry/exit points
      4. Takes into consideration the entire value of the account
      5. Mathematically proven

   2. Improper
      1. Considers only one or the other (risk or reward)
      2. Looks only at certain account properties - win% or win/loss ratios
      3. Says ‘sometimes’

5. Stops should be called ‘trade management’ stops not MM stops
6. Pyramiding is not MM - the decision to add-on is based on price action, not account increase overall
7. Gambler’s fallacy (Jones doesn’t call it this, but that’s what it is) is believing that you should wait for X losers in a row before entering. Disprovable using math.
   1. This is not MM because it doesn’t have to do with how much to risk on the next trade

8. Same with strategies that look at the equity curve moving average - it answers when or when to not trade, but isn’t MM
9. Besides this, both ideas (waiting for x losses and equity curve moving averages) are not proven to improve results in trading

Jones controversially states that only two methods comply with this strict MM definition.

1. Fixed Fractional trading method
2. Fixed Ratio trading method

Where?

1. All leveraged trading, but not buy-and-hold stocks, or mutual funds

When?

1. Yesterday
2. Before taking the first trade
3. Now
4. Jones tells the story of someone who bought his software who made $70K before using his MM system wishing to test the system first; they could have made $600k.

How?
“How you apply these techniques will depend on several factors including but not limited to how conservative or aggressive you are, your goals as a trader, and your tolerance for risk.”

Chapter 2 - Why (Proper) MM?

1. Most traders put more energy into entries than MM but MM is the key to trading success
2. Jones tells the obligatory ‘folly of youth’ trading story
   1. Age 21: he buys a trading system for $100
   2. Against all odds he doubles his $10k account in just 4 months and joins the few 10% of profitable traders
   3. He goes on vacation and calls his broker. Most of his positions have gone sour
   4. By the time he gets back he’s down to $2500.
   5. Pride crushed, devastated etc.

3. Defeat is only temporary. Jones is determined to figure out where he went wrong.
4. He concludes his mistake was overtrading, but then recalls that his broker also dissuaded him from exiting his positions when he was ahead. He concludes that his mistake was listening to his broker.
5. He makes similar mistakes trading different instruments, learning about slippage, and margin requirements along the way

Jones adds the obligatory coin-flipping game example.

1. 100 flips
2. Heads you win $2
3. Tails you lose $1
4. If the coin is fair and you bet $1 per flip after 100 flips you should have an average win of $50. $100 won, and $50 lost = $50 profit.
5. Now, if you have a $100 account what’s the ideal bet (re-investing the difference each time)?
   1. 10% of the account?
   2. 25%
   3. 40%
   4. 51%?

If you’ve read the book thread you might know the answer already. It is shocking how much difference it makes.
Care to take a flier?

No one wants to guess or even Google the answer, well, no matter, friends, I will tell you.

The results are as follows:
A. After 100 flips, @10% $100 turned into $4,700.
B. After 100 flips, @25% $100 turned into $36,100.
C. After 100 flips, @40% $100 turned into $4,700.
D. After 100 flips, @51% $100 dwindled to only $31.

1. If you bet a flat $10 each time without re-investing profits your total would be $600.
2. $25 flat bet would yield $1350.
3. $40 flat bet, after two losses in a row, you’d be unable to continue.

Clearly, in this type of game, getting the fraction right is critical.

Negative Vs. Positive Expectations

1. A positive expectation (edge) is needed for proper MM

The coin flip example would be:


This equation is only useful in theoretical situations where the future win ratio is known. In trading you can only estimate future success based on a backtest.

Another example:


“Knowing that money management is simply a numbers game and needs a positive expectation to work, the trader can stop looking for the Holy Grail method to trading. The trader can stop trying to make a home run in trading. The trader, instead, can concentrate on making sure that the method being traded is logically sound and has a positive expectation."

Chapter 3 - Types of MM
Martingale MM

1. “The martingale category simply states that as the value of an account is decreasing, the size of following trades increase. The basic characteristic of the martingale is that as the account suffers losses, the ability to make up those losses either increases or stays the same.”
2. “No type of money management can turn a negative expectation scenario into a positive expectation.”
3. Gamblers aren’t trying to change the odds but take advantage of streaks.
4. The theory behind doubling the size of the bet is that eventually, the streak has to come to an end.
5. However streaks can randomly last longer than expected.
6. Not recommended for traders, says Jones.

Anti-Martingale MM

1. As an account increases, the amount at risk placed on future trades also increases.
2. Causes geometric growth during positive runs and suffers from what is called asymmetrical leverage during drawdowns.
   1. Asymmetrical leverage simply states that as an account suffers losses, the ability to make up those losses decreases.

1. In some cases this has no effect on trading - for ex. trading a single bonds contract.
   1. Even though the percentage required to recoup the percentage loss of the account increases, the amount of capital to recoup the amount of lost capital remains the same.

2. In other cases it has a huge effect. For ex. If a trader increases their trade size after exceeding a certain account size.
   1. Suppose a trader trades 1 contract per $10k
   2. 1 contract is traded from $10k-$19,999
   3. At $20k, contracts increase from 1 to 2. (doubling)
   4. If the next trade after increasing contracts loses $1k per contract the loss is $2000
   5. Account goes to $18k. Now a single contract is traded again.
   6. Now two winning trades in a row must occur to get back to the point before the loss.
   7. The recovery ability using this method has dropped by 50%.
   8. That’s ‘asymmetrical leverage’. Jones refers back to this many times.

Fixed Fractional MM

1. Only type of MM that was industry-accepted before Jones' came up with 'fixed ratio', he claims.
2. Antimartingale
3. On any given trade, x% of the account is allocated or at risk.
4. The coin flip example is the same MM.
5. Jones promises to go into it in more detail in ch.5
6. Has many other names
7. Examples
   1. Trading 1 contract for every x dollars in the account
   2. Optimal f - Ralph Vince; optimal f for one set of trades might not be optimal for another set
   3. Secure f. Just a safer form of Optimal f
   4. Risking 2-3% on every trade. Common among trading advisers and fund managers.

Fixed Ratio

1. Jones was dissatisfied with the characteristics of Fixed Fractional so he invented this.
2. Also antimartingale
3. Jones will surely describe it in detail later. His baby.

Cost Averaging

1. Not purely a MM type
2. Popular with investors; less so with traders
3. Not purely MM because the decision to average is based on market action.
4. Adds on to losing positions
5. Example
   1. Joe Trader buys $5000 in a mutual fund at $17 per share.
   2. As the price drops he keeps buying $5k worth. At lower prices he gets more stock.
   3. His average cost of ownership declines with each purchase.
   4. So the fund shares don’t have to go back to the original price to recoup his losses.
   5. This can go on for a while, which is why it’s not popular with traders using leverage.

6. Do not add onto losing positions unless you will not have to liquidate.
7. There are situations where cost averaging makes sense in futures.
   1. Commodities can never go bankrupt; but companies can.
   2. Commodities usually always bounce back after a dip and if you cost average during the long time to recovery you will eventually win if you don’t have to liquidate.

8. “Never cost average a short trade!”
   1. Commodities can never go to zero (factually false - look at oil in 2020)
   2. They can always go higher.

Pyramiding

1. Not MM
2. The inverse to cost averaging.
3. Simply adding to a winning position
4. The idea is if the position is winning, the market is trending.
5. Powerful when it is trending; otherwise ‘disappointing’ (to say the least).
6. The decision to pyramid is completely separate from the total performance of the account.

Chapter 4 - Practical Facts
Practical facts are my favorite kind of facts!

Just the facts, ma’am.

Where to Begin Applying MM
Many traders think they should apply MM after they’ve perfected their system. This is a costly mistake.

MM will not come into play unless there are profits in the account.

Antimartingale methods add to trades as the account grows so some success (proof) is necessary before it comes into play.

The proof needed is nowhere near $70k (but then how much?)

There is little additional risk in applying MM from the start. A small additional loss near the start versus a much larger potential reward. If the account does dwindle it simply proves that the edge wasn’t real. So if you don’t apply MM from the start it’s because you expect to lose, and in that case, why trade?

Practical Application Through Different Markets
Proper money management is based on one thing only, account performance, otherwise known as the equity curve of the account. It doesn’t matter where the money came from or how.

Leveraged accounts are the most practical application.

“When investors reinvest 100 percent of their capital, math is taken out of the equation for success.” (?) I don't really know what he means by this and considering how much math shows up in the book later on, it's even more of a headscratcher.

The Role of Margin Requirements
Margin is just the amount of money needed as collateral for placing a trade.
They are usually subject to change at any time for any reason and without warning. (now you tell me!)

Exchanges don’t set margin requirements to help you. It’s for their own protection. MM techniques will rarely be more aggressive than the margin needed to implement them.

What is the proper account size to start trading and be able to apply proper MM principles? Businesses and traders fail due to undercapitalization.

1. Consider your max drawdown. If margin requirement for trading bonds is $3k but your strategy will most likely suffer a DD of $5k, you’re dead.
2. If max DD is $5k and margin is $3k you cannot start the account with less than $8k. You will also want to allow some room for error in your max DD estimate.
3. If you hit max DD and you can’t continue trading what good is that? Jones personally triples or quadruples the margin plus expected DD figure.
   1. This allows him to stay in the game if his system fails to meet profit expectations
   2. Psychologically buffers him so that he can take all trades his system demands
   3. Jones doesn’t discuss psychology as he believes it’s a waste of time. (my man)
   4. If you’re weak then delegate the weakness (find someone (or something) to trade for you)
   5. Gives him a cushion for error
   6. This is just a starting point. The same amount of capital is not needed to increase the risk on a trade. Some traders wait for an account to double before increasing risk. This is illogical. It’s neither safer nor more conservative than proper MM.

Drawdowns

Attached Image (click to enlarge)

DD = Drawdown
The lowest point that equity reaches between two equity highs.

Drawdowns kill, especially with leverage.

DD is unpredictable. Past DDs don’t anticipate future DDs.

DD must be controlled by avoiding the max DD. MM controls DD by decreasing the number of contracts you are trading when DD threatens the account.

Largest Loss
Same category as DDs.

1. The largest single losing trade in a system or method (historical?)
2. The largest single losing trade that will be suffered in a system or method (potential? I might be misunderstanding the distinction.)

Not predictable, even with stops. Markets can open and gap down below stop levels.
These may or not be be devastating to an account; most of the time they are smaller than the largest DD. So they tend to do less damage than DDs. Therefore, preparing for the largest DD also prepares you for the largest loss.

Chapter 5 - Fixed Fractional Trading
Before this book, it was the only game in town, says Jones.

This chapter fully explains the method but individual traders with smaller accounts should not use this method, says Jones. This method was recommended by many because there was no reasonable replacement for it.

Jones tells a highly illuminating story about the first time he tries to teach MM at a Larry Williams seminar. From that experience he learns:

1. Many traders aren’t happy with training materials unless they are confused by them (!) Is this a sub-section of the Clemmo Conjecture?
2. Some traders are rude (lol - well, like any group)

This chapter teaches what you should not use, but it’s important to understand it in order to get the Fixed Ratio method (coming later).

The Math

1. For every trade no more than x% of the account balance will be risked
2. Account size $10k
   1. 2% risk
   2. Biggest trade is $200 (10,000 x 0.02 = 200)

3. Stocks
   1. XYZ is $10/share
   2. Protective stop is at $9
   3. Risk is $1/share
   4. Buy 200 shares

4. Options
   1. $100 /option
   2. Buy 2 options
   3. If options are $400 Joe can’t make the trade

5. Futures
   1. If the risk is $200 he can buy a contract, otherwise, no
   2. If he decides to increase risk to 10% he can buy 5 contracts

The minimum account balance can be calculated as:
Largest potential loss divided by percent risked on any trade

 

1. If your max loss is $1k
2. You’re risking 10% of your account
3. 1000 / 0.10 = 10,000 dollars minimum account balance to trade.

“This is one of the more popular recommendations from industry professionals: Trade one contract for every $10,000 in your account.”

Fixed Fractional trading ignores any number, sequence or outcome of previous trades.
It doesn’t take into account the DD possible from a string of losing trades.

One Contract for every $10,000

1. If Joe Trader has $100,000 account
2. 1 contract for every $10k means he plays 10 contracts next trade
3. If his max risk is $2k per contract his risk on the next trade is $20k
4. This is NOT his potential DD. That’s his risk on the next trade.
5. If he loses two trades in a row he stands to lose 36% of his account
6. 3 losses in a row and he loses 48% of the account

Joe could lower his risk by lowering his max risk per contract.

1. If max risk is $1k per contract
2. Only 10% would be risked per trade
3. 3 consecutive losses would still lose 27% of the account.

Jones demonstrates that even if max DD is restricted to $6k, Joe can still lose 51% of his account using this method.

“For those of you who are new to trading, if you trade on somewhat of a mediocre activity level and go an entire year without suffering a $6,000 drawdown, you are one of maybe .O1 percent of all traders.” (1/10 of 1 percent) What do you have to say to this FTMO fans?

Experienced traders know that $10k DDs are common and with Joe’s system he would lose ⅔ of his account.

Risking 2% or less on Every Trade
Fund managers are fond of this one and it is recommended by trading books and brokers.

Using this risk a $6k DD per contract would only bring the $100k account down to $93k.

The problem with this is not the risk, but the growth factor.

 

1. Assume $1k max loss
2. 2% per trade
3. Requires $50k min balance
4. Trade 1 contract per $50k
5. With $100k Joe can trade 2 contracts

After one loss, the account goes below $100k and Joe is reduced 1 contract. Fractional contracts don’t exist.

Similarly, Joe cannot trade 3 contracts until the account reaches $150k.

Whether Joe drops his risk down to 1% or increases his max loss to $2k the effect is the same. He can only trade 1 contract per $100k and can’t trade a second one til the account doubles to $200k.

“For all intents and purposes, there is no growth factor with this variation. For individual traders, it could be years before the money management strategy will even come into play much less affect the geometric growth of the account.” Which is exactly why it is recommended by brokers. Having you stay small and vulnerable is preferable for them.

But if this method isn’t suitable for individual traders why does it work for CTAs or pool operators? Jones says, it really isn’t, but their large funds disguise the inadequacies. A single contract is nothing to a large fund, so if they win on a single trade they can ramp up to hundreds of contracts in short order.

Asset allocation models used by these funds divide the funds into smaller portions to use for trading by other managers but this prevents the fund from taking advantage of geometric growth.

Somewhere in Between
Risking between 3-9 percent produces the same disappointing results. Jones devotes many pages of spreadsheets to prove his point but I’m sure he’s right.

Optimal F
Popularized by Ralph Vince.
Stands for Optimal Fixed Fraction

Recall the coin-flipping game. 25% was the optimal fraction to use for max profits. Even 24% and 26% produce less optimal results.

This method produces awesome growth but also can have devastating effects.

Every situation will have a different optimal f. Coin flipping games have set parameters and reliable future results, while trading can’t necessarily depend on either of these.

The biggest problem with optimal f is that it conforms to past data. The best fraction may have been 15% in the past 100 trades but only 9% in the next 100 trades in the future.
Re-optimizing after every trade isn’t sufficient because past data skews results too much.

Trading is completely unpredictable, regardless of what numbers can be generated with historical results.

“Optimal f is great math but useless when it comes to practical application in trading”.

Secure F
A variation of Fixed Fractional, that takes advantage of optimal f by using the largest expected DD instead of the largest loss as a starting point.

 

1. $100k account
2. $1500 largest loss
3. 19% optimal f
4. Trade one contract for every $7,895 in the account (1500/0.19)
5. 12 contracts per $100k account using the un-altered method
6. Using optimal f alone you’d be risking 19% on one trade
7. Suppose largest expected DD is $7,500
8. 7500/0.19 = $39,473, so trade 1 contract per $39,473 of account
9. You’d trade only 2 contracts with $100k account
10. Don’t decrease to 1 contract until the account goes below $79,000 (any guesses how this figure is arrived at? $39743x2 = $79,486? Is he just rounding down?)

The problem is this method is still Fixed Fractional trading. The difference is instead of risking 19% per trade we’re risking 3.8% per trade. Smaller traders will still wait a long time before seeing ‘a significant effect’. You can try other things besides the largest possible DD but it doesn’t matter how you slice it.