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Open Bug report MC-2352

Money Management Settings in Portfolio Trader do not work when # shares or dollars are specified within a strategy

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I have a portfolio of strategies that I am using in the Portfolio Trader. These strategies all scale into positions with varying numbers of shares based on volatility and other factors. However, I noticed that when you specify trading limits (ie the number of dollars to allocated to a strategy) and do so in the actual strategy code, the money management settings do not work and you can end up trading on margin. That is, you can trade more than your account is worth.

The money management settings do seem to work when you enter the "dollars per trade" in the strategy properties, but not when you set the trading thresholds from within the strategy code.

I believe that this is a critical bug that needs addressed as soon as possible. There is no way to tell that you are exceeding your account equity when you backtest unless you do a substaintial amount of work to calculate it. People like me just assume that the money management settings are doing their job and are not allowing your account equity to be exceeded. So unless this bug is fixed, those that specify the number of shares to be traded within the strategy code, are at risk of over-levering themselves if they are using Portfolio Trader to place trades and to generate accurate portfolio level backtests.

Portfolio Trader is a great tool and I am hopeful that this issue will be addresses as soon as possible.

Thank you!

Steps to reproduce this issue
  1. Apply a strategy that specifies a specific dollar value that the strategy will trade (ie dollars/close = number of shares).
  2. Assuming that you will trade with $100,000 for this strategy
  3. Apply the strategy to a symbol
  4. Clone the strategy 2 times so that you have 3 identical strategies trading the same symbol and firing at the same time, each allocated $100,000 for $300,000 total
  5. Set the money management settings so that your initial capital is $100,000 and Max% Capital at risk per position is 100%
  6. Run the backtest

You will see that all 3 strategies trade at the same time and put $300,000 into the market or 3 times your account value.

To illustrate further - change the Max % of Capital at Risk per position to 2% and rerun the backtest. Again, the backtest is identical to trading $300,000 even though you should be trading a fraction of the shares under this scenerio. You can play with all the settings of the Money Management, and none of them have any effect on the backtest. The money management settings only work when you specify the dollars per trade in the strategy properties.

Comments (1)
user-offline.png  MultiCharts Support (MultiCharts)
Oct 31, 2017 - 04:26
Hello trader0311,

Please set Max potential loss to 100 % in Portfolio Money Management settings to avoid using more than your actual capital.
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