How can these indicators be converted into a code for execute automatically to proorder???
The consecutive winning streak based risk increment, and the fixed fraction money management.
Thanks!
Add the code snippet at the top of your trading strategy’s code and use the variable POSITIONSIZE for your orders:
if buycondition then
buy POSITIONSIZE contracts at market
endif
And which is the buyconditión in the two cases?
It was just an example, “buycondition” is the condition to initiate a buy order in your own strategy.
I’ve been playing with the money management code posted above by @Despair based on fixed ratio theory by Ryan Jones http://www.straightforex.com/advanced-forex-course/money-management/fixed-ratio/
My very minor modifications:
MM = 1 //select MM = 0 for optimization
if MM = 1 then
once multiplier=1
once fraction=1400 //set to 10x margin required
once newlevel=1400
once oldlevel=1400
once startpositionsize=1
once positionsize=startpositionsize
if strategyprofit>newlevel then
multiplier=multiplier+1
oldlevel=newlevel
newlevel=strategyprofit+multiplier*fraction
positionsize=multiplier*startpositionsize
elsif strategyprofit<oldlevel and multiplier>=2 then
newlevel=strategyprofit
oldlevel=strategyprofit-multiplier*fraction
multiplier=multiplier-1
positionsize=multiplier*startpositionsize
endif
endif
if MM=0 then
positionsize=1
endif
The idea is to keep the required margin for any position size to within 10% of running profit. This code works well at increasing position size for every £1400 of profit (margin in this case = £136), but fails to reduce accordingly. For example, after a £2800 loss in backtest I would expect to see position size reduce by 2; in fact it is only ever reducing by 1 no matter what size the loss and decrease in profits. Position size then becomes unsustainably large and the whole thing runs into trouble, eating into working capital in order to keep going.
I’ve looked at all the other MM snippets I could find but this is the one that comes closest to what I want; v grateful for any help in improving it!
This is another possibility that comes close, based on a percentage system posted by @robertogozzi
ONCE MyEquity = 10000
ONCE positionsize = 1
IF Not OnMarket THEN
IF Strategyprofit >= (MyEquity + 1400) THEN
MyEquity = Strategyprofit
positionsize = positionsize + 1
if positionsize + 1 > 55 then
positionsize =55
endif
ELSIF Strategyprofit <= (MyEquity -1400) THEN
MyEquity = Strategyprofit
positionsize = positionsize - 1
positionsize = max(1, positionsize) //do not allow nLots to fall below 1
ENDIF
ENDIF
But in back testing has the same problem, only reduces by 1 no matter what the drop in profit.
This seems to work, if some very clever person wouldn’t mind checking the code for me, thanks.
Turns out that margin at 10% of strategy profit is unworkable; 3 – 5% is more realistic.
//Money Management
MM = 0 //MM = 0 for strategy optimization
if MM = 1 then
ONCE startpositionsize = 1
ONCE factor = f*margin // insert margin value and optimize for value of f after strategy optimization, typically between 15 and 30
ONCE maxpositionsize = 55 //IG first tier margin limit
IF Not OnMarket THEN
positionsize = startpositionsize + Strategyprofit/factor
ENDIF
IF Not OnMarket THEN
if startpositionsize + Strategyprofit/factor < startpositionsize THEN
positionsize = startpositionsize
ENDIF
IF startpositionsize + Strategyprofit/factor > maxpositionsize then
positionsize = maxpositionsize
ENDIF
ENDIF
ENDIF
if MM=0 then
positionsize=1
ENDIF
Final version
//Money Management
MM = 1 // = 0 for optimization
if MM = 0 then
positionsize=1
ENDIF
if MM = 1 then
ONCE startpositionsize = 1
ONCE factor = 15 // factor of 15 means margin will increase/decrease @ 6.6% of strategy profit; factor 10 = 10% 20 = 5% etc — optimize for best result, profit vs drawdown
ONCE margin = 137 // enter margin value of 1 contract
ONCE maxpositionsize = 27 // DOW $2 IG first tier margin limit
ONCE minpositionsize = .5 // enter minimum position allowed
IF Not OnMarket THEN
positionsize = startpositionsize + Strategyprofit/(factor*margin)
ENDIF
IF Not OnMarket THEN
if startpositionsize + Strategyprofit/(factor*margin) < minpositionsize THEN
positionsize = minpositionsize //keeps positionsize from going below allowed minimum
ENDIF
IF startpositionsize + Strategyprofit/(factor*margin) > maxpositionsize then
positionsize = maxpositionsize// keeps positionsize from going above IG first tier margin limit
ENDIF
ENDIF
ENDIF
“” Position Size Management – Performance based increases “”
Personally i just use a dynamic position size based on equity . Equity rises = size rises at least as a dollar value and naturally Equity drops position size as a dollar value decreases . As far as consecutive losses/ wins i fail to see a benefit in changing relative risk If you have an excessive run of losses relative to the expectancy i dont think you need to be thinking of reducing size , more like turn it of . You need a probability matrix based from the tested winrate to define whats is an abnormally large run of losses to determine when something is drastically wrong ( broken) where rectification of parameters etc needs attention . My dynamic sizing is as simple as initial capital / close + strategyprofit/close (adjusted by whatever coefficient to provide whatever leverage you require) . it works for me and at least reduce risk of ruin after equity runup . Naturally if the consec loses happens from the getgo it wont help risk of ruin but then you got other issues , a sh*t system . Anyway i think this is something to consider . cheers
PS sometimes a large run of losses is just a shit happens where nothing is really wrong with system , but you need to know at what level of consec losses you need to worry . Reducing size relative to consec losses might keep you in the game longer but it also means you need a lot more consec winners to get back to status quo
what level of consec losses you need to worry
Interesting thoughts…
in very general terms, or rather in your experience / with your systems, in how many consecutive losses would you be turning off your systems?
what level of consec losses you need to worry
Interesting thoughts…
in very general terms, or rather in your experience / with your systems, in how many consecutive losses would you be turning off your systems?
Its not a simple ‘ x’ losses number as a number of factors are needed to ascertain the amount . Expectancy is a factor and that is derived from 2 metrics being win rate (WR) & risk reward ratio . Your risk tolerance which forms the risk of ruin (RoR) side of it is another factor . The higher your expectancy the more you can risk per trade as a % of equity without increasing RoR . The better the win rate the less the probability of higher consec losses over ‘x’ trades is . This is whay i always prefer a higher WR system over lower WR given same expectancy . Statistically you will have smaller consec lose runs which gives you to risk slighty more per trade without increasing RoR . Now this is where a probabilty matrix comes in , you can feed in WR as % and it will give you the probabilty of ‘x’ consec losing trades over ‘y’ amount of trades . using this info you can dial in an optimal position size that allows max equity curve growth while keeping RoR within risk parameters you are comfortable with . IE how much you are willing to risk per trade . You really need to find a consec loss probability matrix excel spreadsheet to do this . You might be able to find one if you google it . I dont think i can share an excel file in PRC . You need to explore the expectancy formula as well and thats easily found in google . I dont have time to write everything you need to know here and now . I suggest you get some literature on building quantitative trading systems .
https://vantagepointtrading.com/what-is-trading-expectancy-and-how-it-works/ this the first thing i found in google search , get busy and see if you can work it out , will try and find a probability matrix online if i can . I am actually trading atm so time poor for such a complex thing right now
I dont think i can share an excel file in PRC
Excel files can be attached to your posts.
Please consider this when answering posts Brisvegas:
- Be careful when quoting others in your posts. Only use the quote option when you need to highlight a particular bit of text that you are referring to or to highlight that you are replying to a particular member if there are several involved in a conversation. Do not include large amounts of code in your quotes. Just highlight the text you want to quote and then click on ‘Quote’.
This may help , currently havent got time to check whether this is exactly whats required , will check over weekend and get back to you once i have time
https://www.daytradinglife.com/trading-spreadsheets/losing-streak-probability-calculator/
Thanks again, your response gave me the answer i needed.
I found a website with exactly what you described (https://www.newtraderu.com/2020/07/22/risk-of-ruin-calculator/) and found – through more luck than judgement that the 6 consecutive loss limit I set on my 70% WR aystem was more or less what I needed, in fact. i could probably go up to 7 if needed.
cheers
will check over weekend and get back to you once i have time
Thanks Bris. Yeah, I found one before I saw your post. My system is a 24/5 reversal system so I wanted to have something in there to protect against significant and continuous movements in one direction. Im not sure of there is a better way to do it, but a quit on consecutive losses seemed like a place to start.
