calculating working capital for money management

• 06/06/2021 at 2:30 PM #171262
  nonetheless

  ok, so (nLots*(high * Margin / 100)) wouldn’t work, but it should represent the margin value of the position size shouldn’t it?

   

  

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  06/06/2021 at 3:52 PM #171269
  robertogozzi

  Yes, it’s the total margin requirement.

  Your account could have just that little money, provided your trade always stays above entry price.

   

   

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  robertogozzi

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  06/25/2021 at 9:21 AM #172393
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  Ciao Roberto, I was thinking of a way to vary the speed of change after some profit has accrued – what do you think of this:

  ONCE LotManagement = 1 //1=enable LOT size management ONCE DD = 825 //825 DrawDown ONCE MyMargin = 0.5 //0.5% margin required by the broker ONCE ProfitAccrued = 0 // if strategy is stopped and restarted, insert profit or loss to date in instrument currency DDmultiplier = 3.0 //3.0 DD multiplier if ProfitAccrued + StrategyProfit >= DD then DDmultiplier = 2 elsif ProfitAccrued + StrategyProfit >= DD*2 then DDmultiplier = 1.5 endif ONCE MyCapital = ((DD * DDmultiplier) + (high * MyMargin / 100)) IF IntraDayBarIndex = 0 THEN MyCapital = ((DD * DDmultiplier) + (high * MyMargin / 100)) ENDIF ONCE MinLots = 1 ONCE InitialSize = 1 ONCE nLots = InitialSize IF LotManagement THEN MyEquity = MyCapital + ProfitAccrued + StrategyProfit MyInvestment = MyEquity / MyCapital TempLot = InitialSize * MyInvestment TempLot = round((TempLot * 10) - 0.5) / 10 nLots = max(MinLots,TempLot) ENDIF

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  ONCE LotManagement = 1          //1=enable LOT size management ONCE DD            = 825        //825   DrawDown ONCE MyMargin      = 0.5        //0.5% margin required by the broker ONCE ProfitAccrued = 0       // if strategy is stopped and restarted, insert profit or loss to date in instrument currency   DDmultiplier = 3.0 //3.0 DD multiplier if ProfitAccrued + StrategyProfit >= DD then DDmultiplier = 2 elsif ProfitAccrued + StrategyProfit >= DD*2 then DDmultiplier = 1.5 endif   ONCE MyCapital     = ((DD * DDmultiplier) + (high * MyMargin / 100)) IF IntraDayBarIndex = 0 THEN    MyCapital       = ((DD * DDmultiplier) + (high * MyMargin / 100)) ENDIF ONCE MinLots       = 1 ONCE InitialSize   = 1 ONCE nLots         = InitialSize   IF LotManagement THEN    MyEquity        = MyCapital + ProfitAccrued + StrategyProfit    MyInvestment    = MyEquity / MyCapital    TempLot         = InitialSize * MyInvestment    TempLot         = round((TempLot * 10) - 0.5) / 10    nLots           = max(MinLots,TempLot) ENDIF

  Does that look right to you? I wasn’t sure where the new code should be inserted.

  

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  06/25/2021 at 10:20 AM #172402
  robertogozzi

  Yes, it’s correct. It’s an interesting idea.

  Another idea would be to update DrawDown at runtime. This your code with this idea embedded:

  ONCE LotManagement = 1 //1=enable LOT size management ONCE DD = 825 //825 DrawDown ONCE MyMargin = 0.5 //0.5% margin required by the broker ONCE ProfitAccrued = 0 // if strategy is stopped and restarted, insert profit or loss to date in instrument currency DDmultiplier = 3.0 //3.0 DD multiplier ONCE MyCapital = ((DD * DDmultiplier) + (high * MyMargin / 100)) // update DrawDown ONCE MaxPoint = 0 MyEquityx = MyCapital + ProfitAccrued + StrategyProfit MaxPoint = max(MaxPoint,MyEquityx) DDx = MaxPoint - MyEquityx DDPerCent = DDx / MaxPoint * 100 DD = max(DD,DDx) //compute new DD MaxDDPerCent = DD / MaxPoint * 100 //DD percentage // end update if ProfitAccrued + StrategyProfit >= DD then DDmultiplier = 2 elsif ProfitAccrued + StrategyProfit >= DD*2 then DDmultiplier = 1.5 endif IF IntraDayBarIndex = 0 THEN MyCapital = ((DD * DDmultiplier) + (high * MyMargin / 100)) ENDIF ONCE MinLots = 1 ONCE InitialSize = 1 ONCE nLots = InitialSize IF LotManagement THEN MyEquity = MyCapital + ProfitAccrued + StrategyProfit MyInvestment = MyEquity / MyCapital TempLot = InitialSize * MyInvestment TempLot = round((TempLot * 10) - 0.5) / 10 nLots = max(MinLots,TempLot) ENDIF

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  ONCE LotManagement = 1          //1=enable LOT size management ONCE DD            = 825        //825   DrawDown ONCE MyMargin      = 0.5        //0.5% margin required by the broker ONCE ProfitAccrued = 0       // if strategy is stopped and restarted, insert profit or loss to date in instrument currency   DDmultiplier       = 3.0 //3.0 DD multiplier ONCE MyCapital     = ((DD * DDmultiplier) + (high * MyMargin / 100))   // update DrawDown ONCE MaxPoint      = 0 MyEquityx          = MyCapital + ProfitAccrued + StrategyProfit MaxPoint           = max(MaxPoint,MyEquityx) DDx                = MaxPoint - MyEquityx DDPerCent          = DDx / MaxPoint * 100 DD                 = max(DD,DDx)            //compute new DD MaxDDPerCent       = DD / MaxPoint * 100    //DD percentage // end update   if ProfitAccrued + StrategyProfit >= DD then    DDmultiplier = 2 elsif ProfitAccrued + StrategyProfit >= DD*2 then    DDmultiplier = 1.5 endif   IF IntraDayBarIndex = 0 THEN    MyCapital       = ((DD * DDmultiplier) + (high * MyMargin / 100)) ENDIF   ONCE MinLots       = 1 ONCE InitialSize   = 1 ONCE nLots         = InitialSize IF LotManagement THEN    MyEquity        = MyCapital + ProfitAccrued + StrategyProfit    MyInvestment    = MyEquity / MyCapital    TempLot         = InitialSize * MyInvestment    TempLot         = round((TempLot * 10) - 0.5) / 10    nLots           = max(MinLots,TempLot) ENDIF

  You can get rid of DD percentages, if you are planning not to use them.

   

  

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  06/25/2021 at 10:41 AM #172403
  nonetheless

  So, this would continually monitor actual DD?

  But as positionsize increases, obviously the DD will also increase – at least proportionally. Wouldn’t that mitigate against the objective of placing larger positions in line with performance?

  

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  06/25/2021 at 10:56 AM #172405
  robertogozzi

  Yes, and that would surely mitigate performances. It’s an idea for those with a geater risk aversion attitude.
  Of course it’s contrary to your idea of speeding up change as gains accrue.
  I posted it just as an idea, like many others.
  Money, Risk and Lot size management snippets, as well as those to trail SL, are a great battlefield for new ideas and tests.

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  02/22/2022 at 1:04 PM #188656
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  @robertogozzi, ciao Roberto, as discussed above, I’ve normally been doing backtests @ minimum positionsize and using the max drawdown as the basis for the Money Management.

  //MONEY MANAGEMENT II MM = 0 // = 0 for optimization if MM = 0 then positionsize = 0.2 ENDIF if MM then MinSize = 0.2 // IG minimum position size allowed MaxSize = 550 // IG tier 2 margin limit ProfitAccrued = 0 // when restarting strategy, enter profit or loss to date in instrument currency DD = dd //MinSize drawdown in instrument currency Multiplier = 3 //drawdown multiplier Capital = DD * Multiplier Equity = Capital + ProfitAccrued + StrategyProfit PositionSize = Max(MinSize, Equity * (MinSize/Capital)) if positionsize > MaxSize then positionsize = MaxSize endif PositionSize = Round(PositionSize*100) PositionSize = PositionSize/100 ENDIF

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  //MONEY MANAGEMENT II MM = 0 // = 0 for optimization if MM = 0 then positionsize = 0.2 ENDIF if MM then MinSize = 0.2 // IG minimum position size allowed MaxSize = 550 // IG tier 2 margin limit ProfitAccrued = 0 // when restarting strategy, enter profit or loss to date in instrument currency DD = dd  //MinSize drawdown in instrument currency Multiplier = 3 //drawdown multiplier Capital = DD * Multiplier Equity = Capital + ProfitAccrued + StrategyProfit PositionSize = Max(MinSize, Equity * (MinSize/Capital)) if positionsize > MaxSize then positionsize = MaxSize endif PositionSize = Round(PositionSize*100) PositionSize = PositionSize/100 ENDIF

  I have now started doing backtests with a constant exposure value, ie positionsize = 7000/close

  This gives a more accurate picture of past performance, but usually results in much higher DD

  For example, a code I’m now working on gives a DD of 400 with positionsize = 0.2, but rises to 1650 with positionsize = 7000/close

  Obviously when running live I would be starting at 0.2  (very close to 7000/close at present values).

  But which number would you use for the MM calculation — 400 or 1650 ???

  I realise that there’s no ‘right answer’ but curious to know your opinion on this, thanks.

  (or anyone else’s opinion!)

   

  

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  02/22/2022 at 3:51 PM #188665
  robertogozzi

  The greater the number of lots, the higher the DD is, as it’s simply the exposure. If you suffer at most, say, 100 euros on Dax €1 with 1 lot, the same DD will reach 200 euros with 2 lots, etc….

  You should always use the most recent DD as displayed by PRT when you have finished optimizing with MM disabled. At that point, after coding the correct DD, you can enable MM for a final backtest before starting your code into autotrading.

  You only have to care for the initial number of lots, as each increase of that number at runtime will be consequent to a higher equity available on your account owing to accumulated profits.

   

   

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  02/22/2022 at 5:04 PM #188670
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  thanks Roberto, that is more or less what i had been thinking – good to have some confirmation 😁

  

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  05/02/2023 at 1:32 PM #213984
  ZeroCafeine

  Thank you both for this discussion, I understood almost everything but unfortunately not really everything because my brain blocks a little bit on the 825, someone can give me a good explanation or a concrete example how do you get this number (what initial capital?, what trading instrument?, …. )

  I think that when I have a concrete example I could then try to give my opinion on the variable DDmultiply

  

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