Money Management Program |
|
|
|
| Returns' "Year Category" | Very Conservative 1.5% | Conservative 2.0% | Very Aggressive 3.5% | Custom ph_customTitle |
|---|---|---|---|---|
| Below Average Year (less than ph_bAverage Points) | ph_veryConservativeBelowAverage | ph_conservativeBelowAverage | ph_aggressiveBelowAverage | ph_customBelowAverage |
| Average Year (ph_avg Points) | ph_veryConservativeAverage | ph_conservativeAverage | ph_aggressiveAverage | ph_customAverage |
| Above Average Year (over ph_aAverage Points) | ph_veryConservativeAboveAverage | ph_conservativeAboveAverage | ph_aggressiveAboveAverage | ph_customAboveAverage |
| Two Worst Drawdowns | ph_drawdownVc | ph_drawdownC | ph_drawdownAggressive | ph_drawdownCustom |
| ph_Criteria | ||||
|
The program compares the selected risk level to the limitations on contract size
imposed by initial margin, and uses our maximum stop loss to determine a "Maximum
Risk" associated with all the parameters entered.
|
||||
|
Note - Each scenario above shows the maximum and minimum return for the years as
defined. Please note these are simulated and historical net returns.
|
Click image to view Chart 
|
Using The Money Management Program
We have developed a program to help you evaluate the historical returns generated by the models under various risk assumptions and performance scenarios.
The program requires the input of four variables in order to run the analysis--initial margin required per contract, risk percent per trade, commissions, and initial starting capital. The first entry is the initial margin per contract as required by your broker. The second required entry is the risk per trade percentage. This is the maximum loss that can be tolerated on any one trade. The third item is the total commissions for one contract for both entry and exit. We call this roundtrip commissions. Lastly, the program requires your initial starting capital. When all these figures are entered please select the “Update” button. This will generate a summary and a series of yearly tables with the historical performance for all three trading models.
The initial contract size is set according to your risk preference and subsequently increases and decreases depending on the results of each trade. When reviewing the tables that are generated, please concentrate on how the risk level chosen affects the returns under various conditions. In particular, look to the right of the tables where drawdowns and losses are calculated. The length and depth of the drawdowns and percentage losses per trade are calculated to help you better understand the various risks involved. In addition, the column titled “Peak to Valley” calculates the maximum percent decline from the account balance just before the decline began, to the lowest point during the drawdown period. The summary table also shows the two worst historical drawdowns per scenario.
Our program allows the user to select risk from three predetermined levels in the drop down menu or a custom risk level. After data is entered into all the required fields and the “Update” button is selected, the user may notice, in certain situations, a red pop up stating, “Maximum Risk (X%).” If the user’s selected risk level is greater than the “Maximum Risk”, or if the initial margin amount changes in a way which affects the overall contract size, then the “Maximum Risk” level is calculated and is shown to the user. Changes in initial margin amounts by brokerage firms force traders to adjust their position sizes and risk exposure accordingly. The program compares the selected risk level to the limitations on contract size imposed by initial margin, and uses our maximum stop loss to determine a “Maximum Risk” associated with all the parameters entered.
All of our historical analysis assumes that initial margin does not change. This of course does not happen in real life. Margins per contract can and do change. We urge users of this program to analyze the historical returns with different margin amounts, that may be more relevant for the year that interests them, or in order to better understand how historical risks and returns can be affected by changes in initial margin levels. Please also note the absolute maximum risk levels we assume are 7% for any one trade and 20% for drawdown levels. We strongly recommend that our clients do not take risks greater than these levels. Please note that these are simulated and historical net returns.