Adjusting risk-based position sizing based on growing equity (for backtesting)

AFL Programming
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#1

Hi All, I'm relatively new to AFL, have some prior programming experience although not an expert. I have searched Web, KBs, and AFL Guide and whilst there are several references to position sizing and equity i haven't been able to pull together a backtest module that meets my goals.

My goal: adopt a risk-based position size approach for futures (forex) trading, with:
Equity 0-1m => 2% of equity risked per trade (using a 2xATR based stop for my 1R position)
Equity 1m+ => 1.5% of equity risked per trade (same ATR range stop for 1R calcs)

Code snippet below:

RiskAppetite				= 2;									// initial risk appetite = 2 %
StopLoss_ATR_Range			= 2;									// calculate 1R exit based on 2xATR retracement
AvgTrueRange				= Ref( ATR( Param_ShortPeriod ), -1);	// calc short period average true range
StopLossRiskPerShare		= StopLoss_ATR_Range * AvgTrueRange;  	// calc stop loss
SingleTradeEquityRiskPct 	= RiskAppetite / 100 / StopLossRiskPerShare;
SetPositionSize( SingleTradeEquityRiskPct, spsPercentOfEquity );	// running in futures mode with 100:1 leverage

//i'd love to somehow hav this varying based on equity getting to thresholds
// have tried:
	// RiskAppetite			= IIf (Equity() < 1000000, RiskAppetite, RiskAppetite* 0.75);
// as an alternative to current RiskAppetite calc

// have also tried:
	// SetPositionSize( IIf (Equity() < 1000000, SingleTradeEquityRiskPct, SingleTradeEquityRiskPct * 0.75), spsPercentOfEquity );
// as an alternative to current position size calc

Problem i'm experiencing: I'm finding that the RiskAppetite seems to remain static through the entire backtest cycle, so my position sizes are calculated based on 2% in all cases. I can see Equity() growing so i'm assuming i'm doing something wrong with my array referencing (or my approach in general stinks :-1:).

I'd appreciate any guidance on how to solve (or where to look!)

Thanks in advance!
Craig

#2

Hello,

for that tat the best way is to use cbt, since you can only know portfolio equity value during second phase of backtest.

Something like this:

SetCustomBacktestProc("");

if (Status("action") == actionPortfolio) 
{
    bo = GetBacktesterObject();	//  Get backtester object
    bo.PreProcess();	//  Do pre-processing (always required)

    for (i = 0; i < BarCount; i++)	//  Loop through all bars
    {
        for (sig = bo.GetFirstSignal( i ); sig; sig = bo.GetNextSignal( i ) )
        {	
            if (sig.IsEntry()) // entry signal
			{
				eq=bo.Equity;
				if(eq>1000000) sig.PosSize=sig.PosSize*0.75;
				
			}	
        }	
        
        bo.ProcessTradeSignals( i );	//  Process trades at bar (always required)
    }	  
      
    bo.PostProcess();	//  Do post-processing (always required)
}
#3

Thanks pmxgs I'll give it a try :slight_smile:

#4

@Skippy, don't forget to verify your License

1 Like
#5

Make sure to check Knowledge Base that covers the subject:
http://www.amibroker.com/kb/2014/10/12/position-sizing-based-on-risk/

#6

Thanks Tomasz (and thanks for the awesome product). I have read this a few times (as you have recommended many others to do!) but need to keep working on my dev and testing to embed knowledge. appreciate you all taking time to reply.