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#469761  12/06/17 20:30
Capital slider and required capital for Z systems

Member
Registered: 12/03/17
Posts: 129
Loc: Halifax, NS

Hello, I am trying to understand capital and required capital for Z systems (Z8 and Z9 to be exact). Let's say capital = 5000. Run a test. Perf report gives us Required capital = 5400.
As I understand, I should run the system live with capital slider = 5000. However, I should deposit at least 5400 to the broker account. Right?
What's the recommended amount in case of Z9. Is it twice the required capital? Or 10800 is too much?
Do Z systems notify in case of a margin call?
Edited by kujo (12/06/17 20:35)

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#469841  12/11/17 10:12
Re: Capital slider and required capital for Z systems
[Re: jcl]

Member
Registered: 08/09/13
Posts: 124

Think of the Required capital as the largest historical drawdown, because that is what it is. Then ask yourself how much pain am I willing to experience as I go through this drawdown again. And worse, since statistically, a larger drawdown is in the future.
Let's say you are will thing to sit through a 20% draw down. Then if $5400 is 20% of your account, then you need to deposit $27,000.
So now you can take the annual return amount from your backtest and divide that by $27,000 to get your roughly calculated real ROI. Just think about that a little.
Just take some time to understand what Required Capital (aka maximum drawdown) is and how that affects you risk profile and drawdown tolerance.

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#469862  12/12/17 02:06
Re: Capital slider and required capital for Z systems
[Re: DMB]

Member
Registered: 12/03/17
Posts: 129
Loc: Halifax, NS

Think of the Required capital as the largest historical drawdown, because that is what it is. Then ask yourself how much pain am I willing to experience as I go through this drawdown again. And worse, since statistically, a larger drawdown is in the future.
Let's say you are will thing to sit through a 20% draw down. Then if $5400 is 20% of your account, then you need to deposit $27,000.
So now you can take the annual return amount from your backtest and divide that by $27,000 to get your roughly calculated real ROI. Just think about that a little.
Just take some time to understand what Required Capital (aka maximum drawdown) is and how that affects you risk profile and drawdown tolerance. Thank you for the comments and I agree with the concept. However, I believe that Required Capital is maximum DD (normalized) + maximum open margin. Not only the maximum DD. So, depositing 27,000 is a way to much...

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#470002  12/18/17 20:11
Re: Capital slider and required capital for Z systems
[Re: jcl]

Serious User
Registered: 06/10/13
Posts: 1333

Hi jcl. Doesn't this mean "The Z Strategies" page in the manual has become misleading with the introduction of Z8/9? I.e., for Z1/2/3/7/12 which trade Forex/CFD if it's recommended that Tested CRequired should be exceeded by, say, increasing it to 2X to get a CRecommended, shouldn't that be listed in the comparison table and the Tested AR be then divided by that same 2X to get to a True AR? Which then compares applestoapples to the Z8/9 AR? Something like: System Z1/2/3/7/12 Z8/9
Test CR 1000 1000
Safety Factor 2 1
CRecommended 2000 1000
Test AR 100% 35%
True AR 50% 35%
Thanks.

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#470336  01/09/18 05:25
Re: Capital slider and required capital for Z systems
[Re: DdlV]

Serious User
Registered: 06/10/13
Posts: 1333

Hi jcl. Happy New Year!
When you have a sec, would appreciate your thoughts on the above re. accurately comparing the Z systems.
Thanks.

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