Thanks for your reply jcl.

Your statement would make sense to me if only a very small number of algos/assets with no correlation were traded.

I am fully aware that a simultaneous coin toss play does not completely represent trading due to different timing of events, but to illustrate the point I'd like to use it for an extreme example.

As mentioned above, we evaluated that the optimal F for the coin toss experiment (I will call it market system A) is 0.25. Now I am trading further strategies (I'll call them market system B, C and D) and incidentally the optimal F is 0.25 too. Further the largest loss for all market systems is $1.

Again, this means for each trade I put in $1 for every $4 I got in my stake (OptimalF/Largest Loss * Balance). In case that market systems A - D have a trade open at the same time, 100% of my trading capital are invested.

All that is required to wipe out my entire account is all 4 market systems having their largest loss at the same time.
Unless my market systems are completely anti-correlated this won't take too long. Now it might be argued that trades are usually not opened at the same time, but if one system opens a trade and another system has not closed the trade yet this has exactly the same effect as I could not re-balance my account yet.

This is an extreme case but it illustrates the point that optimal F of a single system traded alone is not the same as the optimal F of that system traded in combination with other systems in a whole portfolio.

And as Ralph Vince states (he uses 10 strategies over 10 markets ==> 10*10 = 100 components), I could be optimal on 99 of these 100 components, yet so far off on one component on the Leverage Space that I am losing money.

A quick and dirty solution according to this article (http://www.futuresmag.com/2012/05/31/managing-portfolio-risk-leverage-space?page=5) is to assume the worst case scenario that all correlations of all of the markets in our portfolio go to 1.00.

Optimal F of each market system would then be the optimal F of each market system traded alone divided by the total number of market systems in our portfolio.

From my example above, the optimal F of market systems A - D would then not be 0.25 for each but 0.0625 (0.25/4).