Portfolio Settings

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blquest
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Portfolio Settings

Postby blquest » 09 Nov 2013

Hi MC,

I have question regarding nuances in the portfolio settings which I could not find an answer to in other posts (if I've missed it please let me know) regarding:
- the "max % of capital at risk per position" in the portfolio settings => money management settings; and
- the "trade size" settings under "properties" after right clicking a strategy in the portfolio backtester.

I will list my questions in order:
1) Is the "max % of capital at risk per position" calculated based on the notional value of the contract (for example, $10,000) or the total margin used per trade (for example, only $4,000 of margin is required for a $10,000 contract)?
2) What is the difference between the "max % of capital at risk per position" and the "trade size" settings under "properties"?
- it seems "per position" and "per trade" refer to the same thing, and these two inputs may conflict with each other

Thank you in advance!

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Andrew MultiCharts
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Re: Portfolio Settings

Postby Andrew MultiCharts » 11 Nov 2013

Hello blquest,

Have you read the respective MC Wiki pages?
1. max % of capital at risk per position
2. trade size

blquest
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Re: Portfolio Settings

Postby blquest » 11 Nov 2013

Hi Andrew,

Yes I have read those two links and it is because the lack of clarity in the wiki that I raise my question.

Link#1 does not answer my first question. There is no clarification on notional vs. margin amount used to calculated % loss.

Link #2 does not answer my question of how MC would handle potential conflicts between trade size settings and % capital per position settings.

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Re: Portfolio Settings

Postby blquest » 11 Nov 2013

Further Andrew, What does the Max Potential Loss actually do? Does it act as a stoploss, liquidating your positions? or will it not let you enter into a position at all? That is not clear from the links you provided.

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Andrew MultiCharts
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Re: Portfolio Settings

Postby Andrew MultiCharts » 12 Nov 2013

Since it was not obvious from your original post in the thread that you have already read the articles, I decided to find out if you did that or not in the first place.
The articles explain how the settings work, but I think I understand what confused you. Let me try to make it clearer for you:
  • The "max % of capital at risk per position" is calculated based on your equity, that is a % of your initial capital value + your profit/loss of the closed trades. It is a general setting for the whole portfolio of symbols and strategies that limits the amount of your position.
  • The "trade size" is not calculated based on equity, it is based on what you specify (amount of dollars or contracts/shares). It is an individual setting for each strategy that limits the amount of your position.
  • If "max % of capital at risk per position" allows you to buy 50 contracts only, while you are supposed to buy 100 contracts according to "trade size", your strategy will buy only 50 contracts.
  • If according to "trade size", you are supposed to buy 50 contracts, but "max % of capital at risk per position" allows you to buy 100 contracts, , your strategy will buy only 50 contracts.
I updated the max % of capital at risk per position article, hope it is clearer now.

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furytrader
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Re: Portfolio Settings

Postby furytrader » 14 Nov 2013

I too don't understand how the "Max Potential Loss" setting affects one's returns. If my strategy is being backtested using 1 contract only, why do I get different results when this is set from 5% to 100% - or if I set my initial equity from $1 million USD to $10 million USD. My strategy does not reference equity to place trades or to manage risk. I am testing my strategy on a diversified portfolio of futures.

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Andrew MultiCharts
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Re: Portfolio Settings

Postby Andrew MultiCharts » 14 Nov 2013

I too don't understand how the "Max Potential Loss" setting affects one's returns. If my strategy is being backtested using 1 contract only, why do I get different results when this is set from 5% to 100% - or if I set my initial equity from $1 million USD to $10 million USD. My strategy does not reference equity to place trades or to manage risk. I am testing my strategy on a diversified portfolio of futures.
Most likely when you set it to 5%, it doesn't allow to buy even 1 contract sometimes, what leads to the difference.


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