Building – Money Management

Hi there,

A newbie here.

I’ve been following the StrategyLab course exactly for now as I get used to the software and ended up with six strategies on GBPUSH H1.

If I retest those with two different money management settings, I obviously get two sets of results. I’ve been testing using 0.1 fixed lots as per the course, and then also doing the same test but using 1% of balance.

The 1% of balance results are a lot worse with “profit factor” dropping and also Ret/DD dropping significantly.

When I try building a strategy with 1% of balance MM, I end up with none because the additional tests wipes them all out. From seeing the numbers change, I believe I’d need to do robustness tests using different parameters – or something else? So, how do I build a strategy that can use 1% of balance and have a clear robustness check list to pass it through?

Any ideas would be much appreciated.

Thanks

Dave

Had a further thought on this…

Since Profit Factor is calculated using win/lose percentage rate and the avg win/loss amount. If an account is growing, the amount won and lost would of course because the amount of money risked on the trade (1% of the balance) would increase and as such the loss amount would increase.

Therefore, is a “profit factor” calculated on a strategy over say 16 years affected by variables such as the if there’s an increase in the number of trades in year 16 compared to year 1 where the balance is very different?

Am I overthinking this? Or is there a better way to assess / robust filter strategies using 1% of balance instead of fixed lot size?

Hi,

the profit factor is always expressed as gross profit divided by gross loss so not affected by sizing up since you make more and lose more as well.

With compounding and sizing up the drawdown expressed as “%” increases so you can use this metric when MM 1% is active to keep the maximum drawdown on your account below certain percent no matter what the current account balance and lot size is

Another good metric here would be the Stability being as high as possible

Thank you so much Tomas, that’s very useful and great to hear as I was starting to look at using the “stability” metric.

In terms of the DD that is expressed in the strategy stats – is the %age number shown the maximum drawdown suffered in one particular period, ie there was 10 x 1% losses so DD was ~10%, or is it an average DD based on all of the periods of DD throughout the testing period?

Thank you.

Personally, I believe that during the Building process only the basic MM methods should be used (Fixed Lots or Fixed Amount) in order to be able to evaluate the “root” quality of the strategies and to be able to compare different strategies on a fair basis.

I believe that more advanced MMs should be used only once the set of strategies to build the final portfolio is more stable and have been live tested (or, even safer, after the first year of live results)