Position Size Management – Performance based increases

Maz · Fri, 12 May 2017 17:36:46 +0000

Hi all, I wanted to open a discussion(s) on position size management techniques. Any serious production system should have an awareness on risk. I sometimes see code attempts to dynamically adjust position size – but this is something I’d like to see more focus on here. Generally, the better a strategy is doing, the more risk it can be allocated; and as a strategy begins to under perform, risk should be reduced and re-allocated to other strategies. If you have a library of automated trading systems running then you’d want them working together so that overall, you are dynamically shifting risk to the best performers from the worst performers. I’d like to invite anyone to get involved here and share their ideas (code or english) on sensible position size management strategies for PRT (or indeed for any systems). I’ll kick this off by sharing a couple of snippets. Average Consecutive Winning Streak based risk increment With this risk increment system, we look at the system’s winning streaks – how many consecutive wins we get in a row. Throughout the system’s running lifespan, we continuously measure the average winning streak (average number of winning trades in a row when a streak occurs). If the current number of wins is greater than our average wining streak (AKA the system is seriously on a roll), we then increase our risk by 1 unit of measure whatever that may be. Here’s the code once maxPositionSize = 10 once positionSize = 1 // Average Consecutive Wins once countWins = 0 once aveConsecWins = 0 once countWinStreaks = 0 tradeJustClosed = (longOnMarket[1] and not longOnMarket) or (shortOnMarket[1] and not shortOnMarket) lastTradeWon = positionPerf(1) > 0 if tradeJustClosed and lastTradeWon then countWins = countWins + 1 // counting the number of wins in this streak elsif tradeJustClosed and not lastTradeWon then if countWins >= 2 then // less than 2 is not a streak countWinStreaks = countWinStreaks + 1 // increase count of winning streaks totalWins = totalWins + countWins // total number of wins so far aveConsecWins = totalWins / countWinStreaks // average consecutivie wins endif if countWins > aveConsecWins then positionSize = min(maxPositionSize, positionSize + 1) // increase risk endif countWins = 0 // we lost - reset number of wins to zero endif graph aveConsecWins coloured (10, 200, 10) as "ave consec wins" graph countWins // ------------------------------- Note that of course you might want to monitor the consecutive losers – and if so, there would be a process for risk reduction on that basis. Daily, weekly or monthly performance review With this kind of a system you look at strategy profit every so often – weekly or monthly etc. If we did well, we increase risk. If we did badly, we reduce risk. Here’s a simple implementation: // Position size management // -- Settings -- once posReviewMode = 2 // 1: weekly | 2: monthly once maxPositionSize = 10 if usePosManagement then once plAtLastMonth = 0 newWeek = DayOfWeek <> DayOfWeek[1] and DayOfWeek=1 newMOnth = month <> month[1] doPosReview = (posReviewMode = 1 and newWeek) or (posReviewMode = 2 and newMOnth) if doPosReview then if strategyProfit > plAtLastMonth + 1 then positionSize = min(maxPositionSize, positionSize + 1) // increase risk else positionSize = max(1, positionSize-1) // decrease risk endif plAtLastMonth = strategyProfit endif endif // ***************************************** There are many more strategies for risk management. The above hardly scrapes the surface. Let’s get a discussion going and perhaps we can end up with a few good snippets. Attached are screen shots of the above snippets. All the best, M

This topic has 31 replies, 5 voices, and was last updated 3 months ago by JS.

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08/29/2024 at 9:37 PM #236875

dubbzie

Hi everyone,

I’ve created a quite aggressive code to change the number of contracts depending on the strategy’s profit. I’m using “multiplier=multiplier+(Strategyprofit/fraction)” to calculate the number of contracts for the next position. Problem: The number of contracts comes with decimals, I want to round down to the nearest whole contract, e.g., 10.1 to 10. I’ve tried using “ROUNDEDDOWN” as mentioned in the Programming Guide, but I can’t get it to work. Does anyone have suggestions for code to round down to the nearest whole number of contracts? Thanks in advance.

dubbzie
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08/30/2024 at 3:38 AM #236879

JS

Floor(10.1) = 10

JS
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