Hi Masterrmind, Can you please share your ideas on how to control drawdown ? How Margin level percentage can be used as an metric? How to determine cycle equity line? Can we divide the equity into a few cycles and then use those cycles as equity stop-loss? Do increasing or decrasing lots help in drawdown management? How to find a balance between Risk and Reward. If I make 10% increase in my equity, shoud I take a 80% risk subsequently to manage the drawdown? At what point shoud I let it go? You have done a lot of work on drawdown management. A set...
Any loss prevention strategy applied must be modified dynamically as required and this is an ongoing process NOT a set and forget approach.
Although its possible to generalize the techniques that seek to 'control DD' this is NOT an effective approach.
What is required here is a full outline of the particular trading strategy including the following:
1. Trading strategy outline;
2. Account information (start balance, any additional access to funds, account leverage, margin stop out, hedge or non-hedge etc);
3. List of symbols to be traded, how the symbols will be traded (seperately, all together or other sequence);
4. Lot sizing (Standard, simple Lot multiplier, CLS, PLS or other hybrid approach)
5. Intraday or longer term;
6. With or without stops.
Margin level % can be plotted on a chart and specific actions taken at pre-defined ML% levels but this depends on the trading strategy being used.
Cycle Equity lines are best determined using a charting approach or plotting Balance/Equity versus Time, there are indicators in MT4/5.
Then have the indicator coded to plot a vertical line on the Equity Chart at cycle completion time and list the key data values.
By dividing the Equity into a few cycles I am assuming that you will allocate X*% of the Balance to a given cycle of trades (1 up to many).
What do you mean by using those cycles as Equity SL ?
Please elaborate.
Increasing and decreasing lot size management is something that I have been working on for a very long time.
You may recall me mentioning the term ECTM which stands for Equity Curve Trace Management.
I most likely will keep the workings of the ECTM approach close to my chest (not outline it here).
What I will say is that I applied this technique for a period of time when trading a demo test of the QAM Strategy (Quantum Asian Method) in 2017.
The method involved adjusting the lot sizes based on the Equity flow.
Lot sizes were increased and then decreased at certain times based on the flow of Equity.
To be very effective at applying the ECTM technique it requires an EA to manage it because trying to do it manually over multiple open trades is not easy and eventually when the adjustments are needed the trader may not be at the platform.
The balance between Risk and Reward is based on testing data sets on symbols of choice and analyzing it and then modifying it on forward or live trading approach if necessary.
"How to find a balance between Risk and Reward.
If I make 10% increase in my equity, shoud I take a 80% risk subsequently to manage the drawdown?
At what point shoud I let it go? "
This may depend on the trading strategy and since I do not know what strategy you will be using it is difficult to comment.You might like to outline your strategy and some of the requested information I have outlined above.
The symbol choice plays a part.
Which symbols will you trade and how will you be trading them ?
ps. Please be aware that a book could easily be written on risk control measures in trading !
Masterrmind..............
Master your Mind then Master your Trades
