Hi jcl. On the Trading page under Switching Strategies, the 2nd bullet says:
If the new strategy has a different Required Capital than the old one - this is often the case for the Z systems - run a test with the old one at the current Margin setting, note the capital, then install the new one with Margin adjusted so that the same capital is required.
Is this correct? In prior threads the upgraded system/strategy was to be Tested to the Required Capital that was originally started with.
For example, say a strategy was started with a Margin setting of 50 reflecting an initial Required Capital invested of $1,000. The strategy has done well, and profits have been reinvested per the square root rule such that Margin is now at 75. If one is now going to upgrade and Tests per the above with Margin 75, won't the resulting Required Capital be too large, essentially ignoring the trading time that has passed, violating the square root rule, and leading to greater risk of margin call?
If on the other hand the above method is OK (possibly equivalent to the other method?), how does one apply the square root rule going forward? Initial capital is used in the formula - in the example above is that the original $1,000 or the newly-calculated Required Capital?
Thanks.
