5% risk for all positions in the amount
Author: annina72
Creation Date: 7/6/2011 10:25 AM
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annina72

#1
Hi!
I use the strategy of "breakthrough channel"!
Every new position opens with the risk of 5%.
But the question is:
How can I do that each new position, together with those which have been already opened, all together give 5% risk.
For example: I open a position when a breakout with 5% risk.
Price moves in our direction.
Stop order becomes closer to the price.
Risk of this position decreases and becomes for example 3%.
Now, when a new breakout I can open a new position with 2% risk.
Once again my question: I need that all active positions in ammount give risk no more than 5% (not each position,but in ammount).
How shall I program this?
Thank you!
Rauf Erk
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Cone

#2
5% trade risk or equity risk? In other words, if the instrument is trading at $50.00 and you're trading with a 100K account, is the risk that the trade drops to $47.50 or that the account equity drops to 95K?

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annina72

#3
Hi Cone!
Thank you for your reply!
I mean the risk of capital.
I opened a position in such amount that would not lose more than 5 percent of total capital.
Stop order is always at the level of minimum prices for the last 30 bars.
After opening a position if the market is not growing, your stop-loss is approaching prices.
If you exit at the stop we would have lost only 3 percent of total capital. Therefore, when a new breakthrough, we can increase the position of bringing it to 5 percent risk.
Thank you very much!
Greetings from Moscow to all!
Rauf Erk
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Cone

#4
Try using the Pyramiding PosSizer.

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That said, the PosSizer will need more information about other symbol Position(s) to meet your requirements. In other words, the pyramid position isn't fixed at a % risk level - it needs to dynamically adjust the % risk size while considering other symbol Position(s).

Although I like the idea, you'd need to create a PosSizer that did this job yourself... unless Eugene likes the idea too and wants to add it as another Pyramiding option.
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Eugene

#5
Good idea but I don't think it will work out. A PosSizer knows the RiskStopLevel assigned to a Position prior to entry. But there can be other stops and exits active simultaneously, and while a Position is open, the PosSizer has no apparent knowledge of whether did the position risk decrease, increase or not change.

Here I mean the Pyramiding PosSizer as a commonly used tool; in a custom tailored PosSizer, you're free to make any assumptions and even send the actual stop price for the current bar to the PosSizer using the .Tag property (for example). It's not impossible, just N/A in the context of the Pyramiding PosSizer -- if my understanding is correct.
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Cone

#6
You may be right that it doesn't belong in the Pyramider (I can't argue with the expert!), but the logic is pretty straightforward:

1. The strategy creates the pyramid trade with a new RiskStopLevel.
2. When that Position is sized, the sizer calculates N shares for the "fixed" 5% Risk stop sizing, and then...
3. subtracts the number of shares that are already owned, ...
4. which leaves the difference as the new Position's size.
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Eugene

#7
Now this puts things in a different perspective, thanks for the clarification Robert. I'll mark this for review later.
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Eugene

#8
Hey Rauf,

I've implemented your idea according to Cone's explanations:

Constant Risk

Update the PosSizer library to version 2011.09 and restart WL6. Let us know your opinion.