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Margin Cost Simulation

by QuantShare, 340 days ago
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In QuantShare, you can simulate a strategy that buys on Margin by editing the trading system, selecting the "Settings" tab, clicking on "Capital" then updating the "Margin Factor" field.
When trading U.S. stocks, you can for example set this value to 2 or you can set it to a higher number if you trade CFDs.

Buying on margin is borrowing money from your broker to purchase a security. It is like a loan granted by your brokerage.
Borrowing money comes with a cost. You will have to pay an interest on your loan.

This money management script allows you to simulate this cost and see its impact when backtesting your trading system.
You can either specify a fixed interest rate (Fixed interest rate field) or specify an interest rate based on a time-series (Example: federal funds target rate + a fixed interest rate).

The script will automatically calculate (for each trading day) the amount borrowed by your strategy and apply a daily interest rate to it. That amount is then subtracted from your equity. It is the interest amount you will need to pay to your brokerage.



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Type: Advanced Money Management

Object ID: 1642


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Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.