Fixed risk per trade money management
Author: GolfPlayer
Creation Date: 12/15/2015 3:11 PM
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GolfPlayer

#1
Hi!
I want to use in my trading systems maney management with fixed risk per trade. So I can't use Max Percent Risk because it cannot open position more then 100% of account. As I understand I have to wtite position size code by myself using PosSizer. Am I right?
Where is it possible to read about PosSizer, how it works, how to send data (stop-loss level) to it, how to write code in PosSizer?
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Eugene

#2
Hi,

With or without a PosSizer, you could not open a position exceeding 100% of account anyway. But you can use margin. How is your MM technique different from the methods already available?
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GolfPlayer

#3
I use method like Max Percent Risk ( I know price, stop level, risk in percents) but sometimes I need to open positon more than 100%. Max Percent Risk limits position size to 100%. How can I buy stocks at 123% or 170% of my trading account?
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Eugene

#4
As mentioned, you can use margin. See Margin Factor in the User Guide (Help menu) > Reference > Data Panel > Position Size Control.
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GolfPlayer

#5
I know about margins. I've set Margin Factor to 10:1 and use Max Percent Risk. Run test. WLD limits trades size at 100% level of my account.
How can I buy more than 100%?

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Eugene

#6
If there is a chance that you overlooked my reply above, I'm duplicating it here:

With or without a PosSizer, you could not open a position exceeding 100% of account anyway.

You can not exceed the account's available equity without using a Margin Factor > 1.0.
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GolfPlayer

#7
Wait! Is not it possible to buy some stock at 120% of my capital even use margins? Even borrow broker's cash?
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Eugene

#8
You can, that's why Margin Factor exists for. You can't exceed 100% risk neither with Max % Risk nor with PosSizer like Position Options (for example).
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GolfPlayer

#9
I do not want to exceed 100% risk. I want to borrow money and buy stocks for example at 120% of my capital (100% my money, 20% borrowed). But Max % Risk does not let me do it even if Margin factor set to 10:1. What to do?
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Eugene

#10
How did you determine that it doesn't let you do it?
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Cone

#11
QUOTE:
How can I buy more than 100%?

Set Margin Factor to 1.2 and then use 120% size. In practice, to avoid dropped trades, set the margin factor a bit higher, like 1.3. For the explanation "why?" see User Guide > Strategy Window > Backtesting Strategies > 100% of Equity Sizing
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GolfPlayer

#12
I set Max % Risk at 20%, use RiskStopLevel in my code, set Margin factor 10:1. Then check sizes of trades. WLD limits them at 100% of accouunt. If I use Max % Risk at 1% then WLD calculates all trades sizes correctly because if use 1% risk size of trades is smaller.

And in the help about Max% Risk:
If the calculated position cash value is greater than the current equity and no other equity Positions exist in the Portfolio Simulation, position size will be based on 100% of current equity. For the sake of argument, assume that Max Percent Risk in the previous example were selected to be 12%. In this case, 1,500 shares would be calculated as the share size, which is worth $120,000 at $80/share. Since the Current Equity is only $100,000, the calculated position will be reduced to 1,250 shares ($100,000 / $80).
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GolfPlayer

#13
Hi, Cone!
I want to use money management with fixed risk per trade. For example 4% of my account.
So, the size of trades will be different in every trade.
For examle, the first trade uses 25% of account, the second one 72%, the third one 56%, etc 80%, 120%, 150%.....

Max%Risk (even Margin factor set 10:1) limits all trades at 100% of account. So size of the trades will be:
25%, 72%, 56%, 80%, 100%, 100% instead of 25%, 72%, 80%, 120%, 150%.



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Eugene

#14
Without (using the built-in Max % Risk) or with the custom PosSizer (like Position Options that lets one enter a %Risk exceeding 100%), Wealth-Lab will limit your position to 100% of current equity anyway. Like the User Guide states, you can not exceed it using Margin.
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GolfPlayer

#15
As I remember, in old version of WLD it was possible to write code using SimuScript which could operate with position size. And it was possible to open positon in one share more then 100% of account using leverage.
Is it possible to write my own code for position size in WLD6?
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Eugene

#16
Comparing Wealth-Lab Developer V4 vs V6 (.NET) > Terminology

$imuScript = PosSizer

If you substitute "SimuScript" with "PosSizer" and re-read my post #14, does that make it more clear?
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Cone

#17
QUOTE:
I want to use money management with fixed risk per trade. For example 4% of my account.
So, the size of trades will be different in every trade.
This part makes sense.

QUOTE:
For examle, the first trade uses 25% of account, the second one 72%, the third one 56%, etc 80%, 120%, 150%.....
In relation to Max Risk %, this doesn't make sense to me. Risk % controls the size of the position. Period. Where does 25%, 72%, etc. "of the account" come into the picture? Please provide a complete example of a sample trade.