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Adaptive Trading System - Minimum Percent Winners and Percent Invested

by Tom Huggens, 3404 days ago
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Adaptive trading strategies usually rely on one or several specific metrics to dynamically update some settings such as the percentage of capital invested. This money management script can transform any simple or complex trading system to an adaptive or auto-adjusted strategy.

When applying this money management script to a trading system, the latter will be able to automatically adjust the percentage of equity invested depending on the percentage of winning trades among previously closed positions.
The money management script allows you to specify two parameters. The Minimum Percent Winners is a threshold below which the percentage of equity invested changes. The Percent Invested allows you to specify how much money to invest when the previous threshold is reached.

Adaptive Trading System Example:
The simulator starts by calculating for each trading period, the percentage of winning trades (The number of winning trades divided by the total number of closed trades and multiplied by 100). It checks whether this percentage is lower than the minimum percentage winning trades (threshold) you have specified. If it is lower than this percentage then the money management script calls the "UpdatePercentInvested" function and instructs the trading software to invest only N% of the total portfolio equity. If it is higher than the specified threshold then it instructs the trading software to allow the trading system to invest 100% of its equity; the strategy becomes fully invested.

The money management object creates also two new time series. The first one is the percentage of winning trades over the simulation period and the second one is the accumulated number of winning trades.

Not that the Minimum Percent Winners as well as the Percent Invested parameters of any adaptive trading system created using this money management script can be optimized.




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Type: Advanced Money Management

Object ID: 587


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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.