Percent - Not 1% as position sized

[stearno]

I have a strategy that is sizing the position as 1% of the account balance. As can see in the attached, it is calculating the position correctly (in lots). I also show that my NT7 settings states the balance is $10,000.

So why does it show when it hits the stop loss, it is not 1%?

One possibility is that my qty of the order is not correct. I am using 100,000 is a standard lot in forex. So when it says .34 standard lots in the position sizing calculation, then I am then multiplying that by 100,000 to get the risk-adjusted order quantity. So as can see in my example, it says to use .34 standard lots, so I was using 34,000 qty.

I appreciate you telling me what I need to do to fix this or help me understand what the Profit % is calculating off of.

thanks,
Stearno

[NinjaTrader_MichaelM]

Hello stearno,

Thank you for writing in. Please see our help guide for more information related to backtesting forex strategies: http://ninjatrader.com/support/helpG...strategies.htm

I unserstand you are trading with an account called backtest. Is this a paper trading account with a broker or a renamed Sim101 account?

If you are submitting the correct quantity and getting the same results, please let me know so I can investigate further.

Thank you in advance.

[stearno]

Hello stearno,

Thank you for writing in. Please see our help guide for more information related to backtesting forex strategies: http://ninjatrader.com/support/helpG...strategies.htm

I unserstand you are trading with an account called backtest. Is this a paper trading account with a broker or a renamed Sim101 account?

If you are submitting the correct quantity and getting the same results, please let me know so I can investigate further.

Thank you in advance.

Yes, as I said, I based the quantity off 100,000. Please see the attachements as I show that I am calculing the lot size correctly (because it was compared to the position size calculator on babypips.com) and then multiplying that lot size by 100,000 to get a quanitty for my order. That is what the help page you gave me said to do.

So if I am risking 1% and the quantity is calculated correctly, then, the profit (when % is the option chosen) in the strategy analyzer column of the Trades tab should show 1% in red when the trade was exited by the stop loss. But as can see in my attachements it does not.

I appreciate your help.

-Stearno

[NinjaTrader_MichaelM]

Hello stearno,

Thank you for confirming. In the risk calculator screenshot you provided, you are determining the following:

-Risk 1% of total account balance

This means that if you were to lose 100% on this trade, you would lose 1% of your total account balance overall.

What you are seeing in the Profit column is the percent of that trade gained or lost from that trade.

For example:
You have $10,000. You entered a trade for $100 (1%), you lost $2.39 in the trade. Your profit reported in the "Trades" window would be something like -0.0239%

See the math: ((100 - 2.39) / 100) - 1 = -0.0239%

If you lost 1% of your total account balance, the profit column for that trade would show -100%

Please let me know if you have any questions or if you require further clarification.

[stearno]

This means that if you were to lose 100% on this trade, you would lose 1% of your total account balance overall.

What you are seeing in the Profit column is the percent of that trade gained or lost from that trade.

For example:
You have $10,000. You entered a trade for $100 (1%), you lost $2.39 in the trade. Your profit reported in the "Trades" window would be something like -0.0239%

Exactly. So whenever it shows "stop loss" in the trades screensshot I attached, then I will have lost 100% of my trade. But yet it does not show 100%.

So with your example, I did loose $100, but it is showing -. 2%.

[NinjaTrader_MichaelM]

Hello stearno,

I believe I have provided a full breakdown of what is going on:

1. You enter 34000 USD at 1.2127 yielding you 28036.612517522882823451801764657 Euro

2. You exit at 1.2097 yielding you 33915.890162447431351529644594706 USD

3. 33915.890162447431351529644594706 / 34000 = 0.99752618124845386328028366455018

4. 0.99752618124845386328028366455018 - 1 = -0.00247381875154613671971633544982

5. -0.00247381875154613671971633544982 * 100 = ~-0.25%


Formulas:
start quantity / currency pair value = number of units of new currency
number of units of new currency * currency pair value = end quantity
(((start quantity - end quantity) - 1) * 100)= % profit and loss which is shown in the Profit column

For you to lose 100% of your trade of $34,000 you would have to get stopped out at a value far greater 30 pips from your entry. 30 pips would lose you ~$100 (or ~100% of a ~$100 trade).

Please let me know if you require further clarification.

[stearno]

Michael,
Thank you for your patience in explaining. I figured out my problem: I came to this with an assumption, so I could not hear what you were saying. Other issue is Forex is different then other instrument classes, so sometimes the terms and calculations are done differently while looking the same. I know that NT7 is mainly for futures and equities and then later Forex was added. So many of the thing calculations are done differeently than is done in Forex.

The aha moment was when I realized in your breakdown, no where did I see the money balance of the account in that calculation, which is $10,056 in the example you broke down. So this "Profit" column (when in percentage) is not the percent difference in actual dollars lost compared to my account balance. Your calculation is saying that this column is the percent difference of the quantity entered and the quantity exited. Am I understanding you correctly?

In Forex, when they are calculating 1% for their position size, they mean 1% of the account balance. 1% of the account balance in this case is $100.56. Thus when I entered the trade, I chose a quantity of 0.34 lots (or 34,000 units) so that if I hit the 30 pip stop loss, I would loose $100.56 (as seen by the Babypips.com position calculator). In this case, I did hit the stop loss. Thus, I should have lost $100.56 dollars.

In your calculation, the numbers showed I lost $84. In NT7, I just now ran another backtest and switched from percent to currency. It shows that the trade actually lost $102 (screenshot attached). So the $84 result is not correct somewhere in the numbers.

In summary, what your calculation breakdown expressed is that this column shows the percentage of difference in the quantity from when I entered the trade against the quantity I exited the trade with. What I had assumed is that this column shows the dollar amount won/lost as a percentage against the account balance.

Do I have correct understanding now of this point?

I started this question because I was trying to validate that my position was sized correctly in my automated strategy and the percentages did not match. Assuming my understanding above is correct, now I know I cannot use this column to show the percentage won/lost in dollar amounts against my account balance (which is what I thought it was showing). I will have to find another way to validate the position sizing is correct (which I ended up doing to provide the attachments to this thread). So question is answered.

Again, thanks for the time to explain this.

-Stearno

[NinjaTrader_MichaelM]

Hello stearno,

I apologize the numbers I provided did not match up as to the total currency lost, however you are correct. The profit column relates to the trade itself as opposed to your total account balance. Based on everything up to this point, your calculation is correct and your stop loss of 30 pips would yield a loss in currency of ~$102 which in the scenario provided is ~1% of the total account balance.

Please let me know if I may be of further assistance anytime.