Equities on margin

[hzqt1k]

How do I set-up a simulation of a margin facility for stocks?

I see how for futures.

[David Samborsky]

The latest pre-release beta version 3.2.0 handles trading on margin for stocks. If you are a registered user you can download and try it out from our download page.

[sectorbets]

...and it works great.

[Stevo]

I don't trade on margin at the moment so this might be a stupid question.

Is it possible that a successful system developed in TradeSim for stocks, or other instruments, traded on margin could give a false impression because open equity drawdowns are not considered?

The main reason I ask is that I am considering investigating some hedging strategies using something like CFD's.

Steve

[tech/a]

Hmm

I trade Margin and as Steve Knows Have developed systems using Tradesim.

Wether you trade margin or not has no effect on the models you test.

Simply if you say place $100K with a lender then I would run simulations based upon $300k.

The whole idea of margin is leverage and the fact that you will be margin called if not profitable.The whole idea of developing a method is so you will have a profitable system that wont be called.

This was the case with my modelling and is the case with my trading.

I think what HZ was alluding to was the leveraged effect on a simulation.

This becomes a problem when you use ALL your capital to trade on margin.All of it is at risk.That risk being minimised by trading a tested expectancy method.

Drawdown does become an issue as you cannot allocate 100% of your capital to the eqation as it is only 1/3rd of total equity.

This should be considered when veiwing and evaluating the results.

Frankly Im yet to see a PROFITABLE method which has an initial drawdown of 30%+.