Indicator to simulate basic scenario of Funding Evaluation. See the Trailing Drawdown
I've been thinking about an indicator or dashboard window for NinjaTrader 8 to simulate the basic environment of a Trader Funding Evaluation.
First, specifying the Account Initial Buying Power (BP). Let's take as example an Initial BP = $30,000 to do some illustrative calculations below, and from here, then the indicator will perform 3 main calculations which are the following:
A) The dynamic Trailing Drawdown (TDD), which refers to the maximum drawdown the account can reach during the Funding Evaluation counting from highest open balance the account has reached, being dynamically calculated tick-by-tick with every new high the balance reaches and also being shown in real time while your trades are open, so it is like a floating Drawdown. In this section the trader must manually set the TDD value into the indicator, specifying the exact amount of money the evaluation s/he will select allows for Trailing Drawdown, for the next example let's say for an account with $30,000 of Initial Buying Power the Trailing Drawdown = $2,000. So for example, if you begin with the Initial Buying Power (BP) of the Evaluation = $30,000 and you have a $500 winning trade as the highest level reached while the trade was open, then the drawdown will trail up this same amount because your Buying Power has made a new high ($30,500) so now you need to avoid your balance descend to $28,500. It is important to note the Trailing Drawdown counts from the highest open balance the account has reached (balance peak), and Since the TDD is calculated based on the highest open balance the account has ever had, then consequently the TDD moves in only one direction, upwards or trailing up, and does not go backwards when the account is having open or closed losses.
I will leave a random link I found that explain how works the Trailing Drawdown:
https://blog.oneuptrader.com/market-...ey-management/
B) The Auto-Liquidate Threshold Value (ALTV), which is the Trailing Drawdown just expressed in a different way, because the Trailing Drawdown is expressed as the amount of money if the account lose it then you are automatically disqualified, and the Auto-Liquidate Threshold Value is expressed as a Balance if the account descend and reaches it then you are automatically disqualified. So one more time, if the account balance reaches this ALTV level through open or realized losses then you are immediately disqualified from the Evaluation. To see this with numbers, if the Initial Buying Power (BP) of the evaluation is $30,000 and the Trailing Drawdown (TDD) is $2,000, then the Initial ALTV of the Evaluation will be $28,000, since the Initial ALTV = Initial BP - TDD. The only special condition is when the ALTV rise up being = Initial BP, in this example this happens when the ALTV = $30,000 = the Initial BP, where from this level upwards the ALTV and the TDD remain fixed at that level for all the profits and loses the account has from then on. So following the example, once the Auto-Liquidate Threshold Value = $30,000 this ATLV and the TDD won't move anymore from that level and the trader should avoid the Account Balance descend and reaches the $30,000 in order not to lose the Evaluation. As well as Trailing Drawdown, since the ALTV is calculated based on the highest open balance the account has ever had, then consequently the ALTV moves in only one direction, upwards or trailing up, and does not go backwards when the account has open or closed losses.
C) Finally, the indicator need to show the evaluation Profit Target (PT), where if for example the Evaluation PT = $3,500, once the account reaches that target then the indicator could show a permanent notification in a corner of any chart you open or maybe as a new tab into the main screen NT8 dashboard, indicating the date and time when the PT was reached, and allowing to continue trading normally looking to increase the account size, and the trader only being alert the account balance doesn't go down and reaches the Auto-Liquidate Threshold Value level either with open trades or with closed trades. Once the PT is reached, it would simply be reflected in green color that the target has been reached, but of course, if the account balance falls below the Initial Buying Power + Profit Target level, then the indicator will continue showing the current Profit Target calculation as it was doing previously in the beginning of the evaluation test.
It is important to note that these calculations must be made based on the whole group of open trades in the account, i.e. based on the portfolio held, and not only based on the one instrument you could have in a chart, or based on separately the long trades and the short trades, no. This means that if you have multiple open positions simultaneously, then consequently the calculations of: the Trailing Drawdown, the Auto-Liquidate Threshold Value and the Profit Target must be calculated based on the whole group of open trades in the account, i.e. always based on the Current Account Balance that is continously changing while your trades are open, regardless of whether you are trading with for example only 1 ES contract, or trading with 10 mixed contracts of ES, MYM, CL, etc., just to give an example.
It is also important the indicator works with every type of account or datafeed, either:
- in Live accounts with real-time datafeed.
- in Demo/Simulated accounts, with real-time or sumulated datafeeds.
- in Market Replay (Playback) historical data, being this is most important part for backtesting purposes before to start with a real evaluation.
Finally, this indicator could be taken into the next level by additionally have the option for the user to manually set and specify:
- The maximum number of contracts (full-size or Micros) that a particular evaluation allows.
- The Daily Loss Limit, only in case the evaluation has it.
- The Weekly Loss Limit, only in case the evaluation has it.
But to start, I think with the A, B and C calculations described above it would have the most essential for a first version of the indicator.
I was checking into the NT8 Trade Performance tool and I see it shows values like 'Max. drawdown', 'Avg. MAE' or 'Avg. ETD', etc. that are all them based on either trades entry points or divided by 2 groups, short or longs trades, but not based on the portfolio Highest Favorable Open Balance the account has reached of longs trades + shorts trades, both as a whole, that is the main point here as you've read.
So, I make the request for the development or assistance in the development of an indicator to do and show what I'm describing here, in order to be able to prepare and refine your trading strategy for a funding evaluation. Even, to initiate and as the development progresses, the indicator could start showing only the Trailing Drawdown and the Auto-Liquidate Threshold Value in a simple and quick way, just as a good starting point and move forward from there, because I can't find an automated way to quickly see the Trailing Drawdown or the Auto-Liquidate Threshold Value, and the only way I've used in the previous 2 weeks is by taking the Ruler tool into a chart and measuring symbol by symbol in the visual highest level a trade has reached in a chart and see what PnL have the rest of others open positions, so as you may imagine it is not an useful way when you want to move fast.
First, specifying the Account Initial Buying Power (BP). Let's take as example an Initial BP = $30,000 to do some illustrative calculations below, and from here, then the indicator will perform 3 main calculations which are the following:
A) The dynamic Trailing Drawdown (TDD), which refers to the maximum drawdown the account can reach during the Funding Evaluation counting from highest open balance the account has reached, being dynamically calculated tick-by-tick with every new high the balance reaches and also being shown in real time while your trades are open, so it is like a floating Drawdown. In this section the trader must manually set the TDD value into the indicator, specifying the exact amount of money the evaluation s/he will select allows for Trailing Drawdown, for the next example let's say for an account with $30,000 of Initial Buying Power the Trailing Drawdown = $2,000. So for example, if you begin with the Initial Buying Power (BP) of the Evaluation = $30,000 and you have a $500 winning trade as the highest level reached while the trade was open, then the drawdown will trail up this same amount because your Buying Power has made a new high ($30,500) so now you need to avoid your balance descend to $28,500. It is important to note the Trailing Drawdown counts from the highest open balance the account has reached (balance peak), and Since the TDD is calculated based on the highest open balance the account has ever had, then consequently the TDD moves in only one direction, upwards or trailing up, and does not go backwards when the account is having open or closed losses.
I will leave a random link I found that explain how works the Trailing Drawdown:
https://blog.oneuptrader.com/market-...ey-management/
B) The Auto-Liquidate Threshold Value (ALTV), which is the Trailing Drawdown just expressed in a different way, because the Trailing Drawdown is expressed as the amount of money if the account lose it then you are automatically disqualified, and the Auto-Liquidate Threshold Value is expressed as a Balance if the account descend and reaches it then you are automatically disqualified. So one more time, if the account balance reaches this ALTV level through open or realized losses then you are immediately disqualified from the Evaluation. To see this with numbers, if the Initial Buying Power (BP) of the evaluation is $30,000 and the Trailing Drawdown (TDD) is $2,000, then the Initial ALTV of the Evaluation will be $28,000, since the Initial ALTV = Initial BP - TDD. The only special condition is when the ALTV rise up being = Initial BP, in this example this happens when the ALTV = $30,000 = the Initial BP, where from this level upwards the ALTV and the TDD remain fixed at that level for all the profits and loses the account has from then on. So following the example, once the Auto-Liquidate Threshold Value = $30,000 this ATLV and the TDD won't move anymore from that level and the trader should avoid the Account Balance descend and reaches the $30,000 in order not to lose the Evaluation. As well as Trailing Drawdown, since the ALTV is calculated based on the highest open balance the account has ever had, then consequently the ALTV moves in only one direction, upwards or trailing up, and does not go backwards when the account has open or closed losses.
C) Finally, the indicator need to show the evaluation Profit Target (PT), where if for example the Evaluation PT = $3,500, once the account reaches that target then the indicator could show a permanent notification in a corner of any chart you open or maybe as a new tab into the main screen NT8 dashboard, indicating the date and time when the PT was reached, and allowing to continue trading normally looking to increase the account size, and the trader only being alert the account balance doesn't go down and reaches the Auto-Liquidate Threshold Value level either with open trades or with closed trades. Once the PT is reached, it would simply be reflected in green color that the target has been reached, but of course, if the account balance falls below the Initial Buying Power + Profit Target level, then the indicator will continue showing the current Profit Target calculation as it was doing previously in the beginning of the evaluation test.
It is important to note that these calculations must be made based on the whole group of open trades in the account, i.e. based on the portfolio held, and not only based on the one instrument you could have in a chart, or based on separately the long trades and the short trades, no. This means that if you have multiple open positions simultaneously, then consequently the calculations of: the Trailing Drawdown, the Auto-Liquidate Threshold Value and the Profit Target must be calculated based on the whole group of open trades in the account, i.e. always based on the Current Account Balance that is continously changing while your trades are open, regardless of whether you are trading with for example only 1 ES contract, or trading with 10 mixed contracts of ES, MYM, CL, etc., just to give an example.
It is also important the indicator works with every type of account or datafeed, either:
- in Live accounts with real-time datafeed.
- in Demo/Simulated accounts, with real-time or sumulated datafeeds.
- in Market Replay (Playback) historical data, being this is most important part for backtesting purposes before to start with a real evaluation.
Finally, this indicator could be taken into the next level by additionally have the option for the user to manually set and specify:
- The maximum number of contracts (full-size or Micros) that a particular evaluation allows.
- The Daily Loss Limit, only in case the evaluation has it.
- The Weekly Loss Limit, only in case the evaluation has it.
But to start, I think with the A, B and C calculations described above it would have the most essential for a first version of the indicator.
I was checking into the NT8 Trade Performance tool and I see it shows values like 'Max. drawdown', 'Avg. MAE' or 'Avg. ETD', etc. that are all them based on either trades entry points or divided by 2 groups, short or longs trades, but not based on the portfolio Highest Favorable Open Balance the account has reached of longs trades + shorts trades, both as a whole, that is the main point here as you've read.
So, I make the request for the development or assistance in the development of an indicator to do and show what I'm describing here, in order to be able to prepare and refine your trading strategy for a funding evaluation. Even, to initiate and as the development progresses, the indicator could start showing only the Trailing Drawdown and the Auto-Liquidate Threshold Value in a simple and quick way, just as a good starting point and move forward from there, because I can't find an automated way to quickly see the Trailing Drawdown or the Auto-Liquidate Threshold Value, and the only way I've used in the previous 2 weeks is by taking the Ruler tool into a chart and measuring symbol by symbol in the visual highest level a trade has reached in a chart and see what PnL have the rest of others open positions, so as you may imagine it is not an useful way when you want to move fast.
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