Money management with percentage relative to balance does not work correctly

Hi,
As recommended in the tutorial, I've been generating strategies using fixed lot size (0.1 lot). However, I believe sound money management is key, therefore I would like to use the MM system to get EA take a risk percentage relative to either balance or account. Using this feature, there are issues as the strategies do not behave correctly. I've already posted the issue on the forum and Tomas Matejka recommended me to post here.
I'm attaching an example to illustrate the issue.

For this strategy (strategy 3.17.158 for GBPUSD 15M), the parameters I used after exchange with Tomas were the following: Risk fixed % balance : 1%, size decimals : 1; Maximum lots : 50; Size if no MM : 0

I’ve attached various pictures so that you understand my issue.

In the trade list attached, we can see that the strategy takes various lot sizes. However, lot sizes taken by the strategy do not seem to be in relation to a certain percentage of risk… Why does it trade then if, according to the setting “lot if no MM value” is zero? Losses are mentioned to have been triggered by stop losses in the trade record. However, the profit/loss columns mentions a percentage loss which rarely corresponds to 1% risk in relation to the balance.

In addition, the maximal adverse excursions are sometimes bigger that the loss level…how is it possible? I expect that if risk is set to 1% according to the balance, when equity level drawdown (represented here by the maximal adverse excusion – MAE) reaches 1%, the stop loss should be triggered.  It did not…

Focusing on the biggest MAE now, it reached $3045 (ticket 3626), triggering a 10.35% loss in just one trade! Even if the strategy seemed profitable overall, an open drawdown representing more than 10% of an account balance is not sound money management.

Moreover, it seems that the profit/loss and the % drawdown column do not take the same reference for the calculations. This trade (ticket 3626) is mentioned to have triggered a 22.81% loss and a 10.35% drawdown…I guess that the profit/loss column refers to the starting capital (10K) and that the % drawdown refers to a calculation in relation to the current balance at the moment of the trade. This is a bit confusing when trying to play with data.

Would it be possible to have a REAL stop loss guaranteed to be equal to an equity drawdown of x% risk according to the balance. Even if the EA cannot determine before taking the trade, the level where the trade should be closed (if linked to some indicators' levels/crossovers etc.), the trade will automatically be closed when loosing x percent and that rule would SUPERSEDE the other exit rule (based on indicator level). Strategies may therefore not be as profitable as they seem to be but you will guarantee a sound risk management system and you will allow what should matter most for the traders : the preservation of their capital.

 

Many thanks in advance

Kind regards

Attachments
Equity chart.png
(95.82 KiB)
MM settings - MAE.png
(60.36 KiB)
Biggest MAE.png
(248.36 KiB)
Strategy-317158.sqx
(85.75 KiB)
list trades.png
(177.32 KiB)
  • Votes +2
  • Project StrategyQuant X
  • Type Bug
  • Status Fixed
  • Priority Normal

History

m
#1

microsporum

02.08.2020 01:25

Task created

m
#2

microsporum

03.08.2020 22:03
Voted for this task.
MF
#3

Mark Fric

06.08.2020 13:08

Status changed from New to In progress

This will be fixed in the new build 129.


In older builds if you set Size if no MM = 0, it used size=1 as the default - that's why you still see the big losses.

In Build 129 it will not open the trade if size = 0.


For explanation - % Drawdown and Profit/Loss % are two different things. Drawdown is computed from the last peak of equity, and % P/L from equity at the beginning of trade. SO they can be different.

When 

TB
#4

Tomas Brynda

06.08.2020 15:48

Status changed from In progress to Fixed

m
#5

microsporum

06.08.2020 17:33

Ho Marc,

Thanks for your reply. If I understand correctly, in the new version (is it build 129 or build 130?), the EA will not place the trade at all if it cannot calculate the level of stop loss in relation to the MM setting (e.g. 1% risk). Is this correct? That would be weird in my opinion, because the way it is recommended to generate strategies (for comparison purposes)  is the fixed lot size, where EAs will never be obliged to set up a stop loss according to a certain percentage of balance or equity. Therefore, SQx will still generate those strategies, which when MM will be turned to risk percentage, they will not generate trades anymore in certain circumstances.

Instead, could we not have a feature that would allow the EA to place the trade BUT when the equity loss reaches out the set percentage of loss, then it will close out the trade? And that rule will supersede any other rule to guarantee capital preservation...

The rationale here is that even if the EA cannot determine the level of exit (if for example, it is related to a certain indicator level) at the moment of the trade, it could be that it will still be profitable. Preventing the EA to open trade is somehow preventing potential profitable trades...

Best wishes.


SF
#6

SergeyF

07.08.2020 12:00
Voted for this task.

Votes: +2

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