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#469761 - 12/06/17 20:30 Capital slider and required capital for Z systems
kujo Offline
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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#469771 - 12/07/17 16:58 Re: Capital slider and required capital for Z systems [Re: kujo]
jcl Online

Chief Engineer

Registered: 07/22/00
Posts: 26402
Loc: Frankfurt
The recommended MINIMUM is always the Required Capital. The slider setting gives only a ballpark figure.

The systems detect a margin call only in the backtest. In live trading you will be notified by the broker in bold red letters. Believe me, you won't miss a margin call.

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

Registered: 12/03/17
Posts: 129
Loc: Halifax, NS
Originally Posted By: DMB
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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#469868 - 12/12/17 09:45 Re: Capital slider and required capital for Z systems [Re: kujo]
jcl Online

Chief Engineer

Registered: 07/22/00
Posts: 26402
Loc: Frankfurt
In the case of Z8 and Z9, the maximum margin is normally much higher than the max DD. So you do not need to exceed the required capital. It's different in Forex or CFD systems where margin is normally negligible compared to drawdown.

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#470002 - 12/18/17 20:11 Re: Capital slider and required capital for Z systems [Re: jcl]
DdlV Online
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 apples-to-apples to the Z8/9 AR?

Something like:

Code:
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]
DdlV Online
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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