[RobinHood]

In Portfolio Management Formulas Ralph Vince mentions that trading less than optimal f decreases risk arithmetically but decreases your profits geometrically.

What is the difference between an arithmetic increase/decrease vs geometric?
(some sort of in-depth resource link will be good if it cannot be summarized)

I haven't been able to find any simple explanation on the difference between the two.


Does anyone here use optimal f in their trading, in some way?

[RobinHood]

Ok, I got it. Geometric must refer to exponential type growth....

[Flojomojo]

Watch out, exponential in something else.
Arithmetic stands for + a factor. Geometric stands for * a factor. So your profits decline a lot faster than your risk decreases. Check out:
http://en.wikipedia.org/wiki/Geometric_progression
http://en.wikipedia.org/wiki/Arithmetic_progression