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Money management to Reject Trading Positions Based on their Past Performance

by Tom Huggens, 3324 days ago
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Here is a money management script that can be applied to any trading system to prevent it from buying positions that didn't perform well in the past. This money management item simply tracks new positions in the "OnNewPosition" event and then decides whether to allow the position to be bought or trade to be taken given the inputs you have previously chosen. These inputs can be updated directly from the trading system panel after the money management strategy is applied to it.

There are two variables/inputs in this money management item:
Past Days: Whenever a trading strategy tries to buy a new stock/instrument, the item will search for previous trades for the same symbol to decide whether to allow the new position to be taken or not. This variable instructs the item to search only for trades that were closed during the last number of days specified in the "Past Days" field. So, if you want to ignore trades that were closed since more than 2 years ago, you can simply put the value "730" in this field.
Number of Trades: For each new position and given the old positions that are retrieved by this item (using the Past Days parameter), this variable gets the minimum number of non-profitable trades (trades whose performance is below zero) that must exists in order to reject the new trading position.

The money management script is very simple and consists of few lines of code. You can easily modify it in many different ways. You can for example ignore positions whose performance was below a certain threshold or ignore them based on another metric, such as Sharpe ratio, Sortino ratio, return per bar, maximum drawdown...




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Type: Advanced Money Management

Object ID: 772


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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.