When the strategy is running in a portfolio and it is not behaving well, there should be a trigger to handle this. I would propose the following options:
1. Automatically turn it off from trading and i.e. send a notification about it, or
2. Decrease the size of position to a predefined minimum i.e. 0.01 lot and send a notification. It will still be running but we can spot it sooner and keep monitoring it closer.
2a. Strategy that will come back up with a profit by the predefined value of pips or % could come back to its former size of the position.
The trigger for turning the strategy off or decrease the size of the position - options :
1. Maximum DD in history in % or pips (i.e. 120%)
2. Maximum DD in a specified period of time (i.e. last 3 years) - it will allow to not wait to the highest DD that ever happened.
I know there may be a challange with having the right information about DD in history so below is option 3 - manual setting.
BTW, automated DD could be embedded at the time when backtesting is done for the strategy. Its value could be added to strategy CODE in the form of variable as an option to use).
3. Manually added value (% or pips) as a variable at the strategy start time.
It would really help to better manage portfolios and weak strategies
Please let me know your thoughts.
Thank you, Piotr
Description changed:
When the strategy is running in a portfolio and it is not behaving well, there should be a trigger to handle this. I would propose the following options:
1. Automatically turn it off from trading and i.e. send a notification about it, or
2. Decrease the size of position to a predefined minimum i.e. 0.01 lot and send a notification. It will still be running but we can spot it sooner and keep monitoring it closer.
2a. Strategy that will come back up with a profit by the predefined value of pips or % could come back to its former size of the position.
The trigger for turning the strategy off or decrease the size of the position - options :
1. Maximum DD in history in % or pips (i.e. 120%)
2. Maximum DD in a specified period of time (i.e. last 3 years) - it will allow to not wait to the highest DD that ever happened.
I know there may be a challange with having the right information about DD in history so below is option 3 - manual setting.
BTW, automated DD could be embedded at the time when backtesting is done for the strategy. Its value could be added to strategy CODE in the form of variable as an option to use).
3. Manually added value (% or pips) as a variable at the strategy start time.
It would really help to better manage portfolios and weak strategies
Please let me know your thoughts.
Thank you, Piotr