Hi,

I would just like to confirm one point for futures / portfolio mode (Max % Risk):

I have 1 unrealized position open.
Account 100 k
Cash 80 k (open using -15k, and futures margin -5 k).

I have a signal to enter a second trade, using MaxPercentRisk (1.5%).

Is my position size based on 1.5% of 100 k?
Or Is my position size based on 1.5% of 80 k?
Or anything else?

Just a sanity check..

Hi,

Max % Risk is based on the current equity.

Thanks,

With Futures, how are we defining equity ?
Is the initial margin from open positions subtracted from the equity ?

If I am using 1.5% Max Percent Risk position sizing, and have an account of 100k, and have 1 position open which is using 10K for margin...
And the backtest takes a second trade... how will Max Percent Risk define Equity in order to calculate the position size?

With Max % Risk, you're defining the percentage of the current account value that you will lose if you exit the position at the defined stop level. (There's an explicit example (for stocks) in the User Guide: Reference > Data Panel > Position Size Control > Portfolio Simulation Mode > Max Percent Risk.)

QUOTE:
If I am using 1.5% Max Percent Risk position sizing, and have an account of 100k, and have 1 position open which is using 10K for margin...And the backtest takes a second trade... how will Max Percent Risk define Equity in order to calculate the position size?

Assuming that the Position has not changed from the entry price, the account is still worth $100K, so 1.5% = $1500.

Thanks Cone, yes Ive seen the example in the User Guide, but as you say, its stock specific.

QUOTE:
Assuming that the Position has not changed from the entry price, the account is still worth $100K, so 1.5% = $1500.

Yes, lets assume the position has not changed.
I am not sure here, but how can I risk 1.5 % of 100 K, if 10 k is already being used as margin requirements for an existing open position ?
In reality don't I only have 90 k ?

The amount of futures margin available and % risk are two separate things.

Example 1:
You have $10,000 cash and buy a S&P E-mini (ES) contract, which carries an initial margin requirement of, say, $6000. No matter how much of your $10K that you decide to risk, you can only buy 1 contract because 2 contracts would required $12K in margin.


Example 2:
ES has a $50 point value and is currently trading around $2,030, and your stop value is $2,015. You want to risk 2% of your $100K account on this trade, which is $2000. How many contracts can you buy?

Answer: $2000 / $50 / (2030 - 2015) = 2.67 contracts

Hypothetically this means that if you had bought 2.67 contracts at $2,030 and stopped out at $2,015, you will have lost $2,000. Of course, you can only buy an integer number of contracts, 2 in this case, so your actual loss in this case will be less than the 2%.

Furthermore, you would only be allowed to purchase both contracts if you had at least $12,000 of margin available. See how that works?

Example 3:
Same setup, but if your stop were $2,020, then you could buy precisely 4 contracts. But this now requires that you have $24,000 of futures margin available. If you only have $20,000 in cash, the trade would be rejected entirely with the standard PosSizer for % margin.

Cone,

Thanks for your reply, will revert if required