Portfolio Heat

[Shane Baker]

HI David,
I know that the risk % is released when the trade has exited in TradeSim. Whilst this is useful in shorter term strategies, in longer term strategies it would be useful to have the risk % released for further trades when the stop reached the entryprice rather than waiting for the final exit to occur.

Would it be possible to incorporate an option within your dll to trail the initial stop so that the risk is released when the initial stop reaches breakeven?

Cheers and thanks

Shane

[David Samborsky]

Whilst this is useful in shorter term strategies, in longer term strategies it would be useful to have the risk % released for further trades when the stop reached the entryprice rather than waiting for the final exit to occur.

If protective stops are enabled then your trade will automatically exited with a loss similar to the target risk anyway. If the EntryPrice hits your InitialStop then the protective stop will take you out of the trade.

[Shane Baker]

Hi David,

Perhaps I didn't make myself clear. What I was trying to request was a function that allowed the initial risk $ to be released once the trailing stop reached the entry price. Then another entry could be made at this time, rather than waiting for the trailing stop to be triggered as an exit and then release the risk $. There would be then two positions,one with a stop at breakeven and a new position with a new initial stop.

My understanding is that TradeSim accounts for a portfolio risk and that risk is not released until a trade is exited either by its initial stop (as a loss) or by the trailing stop. If you are a long term trader then it would be advantagous to test for releasing the risk$ from the portfolio risk after the stop has passed breakeven (or the entry price)..thus allowing a new trade to commence

Cheers

Shane

[Shane Baker]

Hi David,

Perhaps I didn't make myself clear. What I was trying to request was a function that allowed the initial risk $ to be released once the trailing stop reached the entry price. Then another entry could be made at this time, rather than waiting for the trailing stop to be triggered as an exit and then release the risk $. There would be then two positions,one with a stop at breakeven and a new position with a new initial stop.

My understanding is that TradeSim accounts for a portfolio risk and that risk is not released until a trade is exited either by its initial stop (as a loss) or by the trailing stop. If you are a long term trader then it would be advantagous to test for releasing the risk$ from the portfolio risk after the stop has passed breakeven (or the entry price)..thus allowing a new trade to commence

Cheers

Shane

[Pat]

I agree with Shane.

This would be a great feature to have (especially with the utilisation of margin products like CFD's or Margin Loans) as these types of products allow you to have many many multiple positions open at any one time and the ability to get an electronically back tested result of entering new positions whenever the portfolio risk had reduced below a set maximum could greatly enhance the overall profitability of the system.

It would be great if this new feature could be apended to all styles of position sizing as well (With the initial heat calculated on Trailing Stop value if no Protective stop is present - Or alternatively assuming 100% risk on the trade if no Protective or Normal exit rules are evident)

Not to mention the time savings gained by not having to do this task manually.

I find at the moment that I don't use Portfolio Heat within TradeSim as it effectively duplicates the Maximum number of Open trades parameter already set.

Cheers,
Pat

[Scott]

Hi David,

This issue is raising its head again, and it would be very useful to be able to release heat once a trade has reached breakeven.

This matches the reality of trading CFD's with a GSLO as margin is returned to the account as the GSLO is moved closer to BE.

People are trying to get around this by increasing heat to allow extra positions but this is an inaccurate picture of a trading system as well.

Are there any plans to introduce a feature to calculate heat only based on the trades currently below breakeven?

Thanks

Scott

[David Samborsky]

I could add an extra field that looks at the ExitPrice and when it breaks past the EntryPrice it then records that date. This date is used by TradeSim to flag when the risk for the trade has been nullified and so TradeSim can take on more risk even though that existing trade has not been terminated.

But this assumes you are using a ratchet trailing stop of some kind and ExitPrices never fold back.

Also you must realize that this does not take into account the risk associated with commissions and transaction costs because the PS size and costs are not known when the trade database is being generated so the actual true risk is only approximately known.

regards
David

[Scott]

Hi David,

That would be great, and yes I am using a ratchet stop that only goes one direction with the trade.

The transaction cost issue is noted and I suppose if your transaction cost is high relative to your position risk then this could cause a problem.

Also with CFD's the financing would not be taken into account.

However your proposed solution would be a lot closer to the trading that a lot of CFD traders use particularly with GSLO's.

Where as soon as my margin is returned, I open another position and ignore transaction costs and financing in establishing my breakeven just the same as I ignore dividends received and conversly interest received and dividends paid on short sales.

Any longer term system trader will value this as an option rather than trying to bump heat up to try to account for margin returned and opening another trade.

P.S. forgot this also applies to pyramiding where I will pyramid at breakeven so when my heat is freed up I will pyramid at breakeven in preference to taking a new trade.

Thanks for taking the time to respond

Regards

Scott