No announcement yet.

Max DD limit clarification

  • Filter
  • Time
  • Show
Clear All
new posts

  • Max DD limit clarification

    It is important that you understand how this feature works and how it could potentially close trades on your account. This feature is only part of our MT4 EA connection method.

    If you were to enter a value of "10" then it would monitor your trades to make sure that the equity for this signal did not go beyond 10% of your overall balance.

    For example:

    If your balance is $1000 and you have entered a max % drawdown of 10% then if your open trades for this signal were to go beyond $100 in floating loss, it would trigger this to close all trades related to this signal.

    While developing this feature, we were keen not to allow it to effect the speed of the copier, and as such it does all processing of the % drawdown on the server side. This means there is a substantial delay and it only does the checks approximately 2-3 times per minute. This means that you could hit your specified max drawdown level but the system not detect this for 20-30 seconds.

    We urge you to understand that while this is a protection method, that it should not be relied upon to cut your trades at an exact level.

    Will/Daniel/Philip could you please confirm this is worked out on balance and NOT equity.

    I am going to be seriously changing and micromanaging my risk settings after this Viper debacle.

    The reason I ask is I run multiple signals on 1 account. So running Pipsopolis and SmartTrader and TA and SmartScalper on the same account obviously there will be moments of floating drawdown which is fine. The new option of setting the risk as per balance is a great concept and I have been asking that for months so very happy to be able to test that in the new EA. So that solves my main issue for the last months (I mean apart from losing money).

    But obviously where it can get complex is running Viper on a max DD setting. I DO NOT want to put Viper to 1x risk now after losing 40% of my account. It would take forever. I already have some white hairs. So I plan to continue running Viper on 3x but will set a max DD limit for him at say somewhere between 6-9%. What I would need to happen for this to actually be a usable function is for the DD limit on the EA to definitively calculate this on the balance and NOT the equity. As much as i would love to run 1 account per signal I just don't have the required funds and there should be no issues in having a portfolio or signals on one account if smart about it. I will be setting a max DD limit on all scalping signals from now on. As I believe scalpers should stick to scalping. It is unnecessary for a trader of this ilk to be swing trading. I am not just talking about Viper here, this can refer to Reborn/Trusted/whoever.

    So could you please confirm that 100% for me?

    Much appreciated, and I hope that some others find this post and resulting answer useful.


  • #2
    Has anyone got an answer to the above question?


    • #3
      I'm not sure how DD can be based on equity since equity must always be 100% of equity! Surely equity can only be compared to balance?


      • #4

        It's based on the current balance:

        Drawdown in % = [ ( Current balance - current equity ) / Current balance ] x 100%

        For example:

        Current balance: 7200
        Current equity: 6800

        Equity difference: 7200 - 6800 = 400
        Equity ratio: 400 / 7200 = ~0.06
        Percentage: 0.06 x 100 = 6
        Current drawdown in %: 6%

        Now you can also understand why we check your current DD level approximately 2-3 times per minute, it's because calculation is made on our side (server side) and it would just take a lot of resources to calculate it every tick/second.


        • #5
          Hi Daniel,

          Please clarify this situation:

          2 signals: A and B
          Balance = 5000
          Equity = 5200

          Signal A contribution: +600
          Signal B contribution: -400

          So if I configure B's cutoff percentage to be 6% i.e. 400 / 5000 =8% - what will happen? Will B get closed even though the overall DD is above 0 (positive equity). This is an extreme example but would make things clear for me. One could get caught out thinking signal A gives signal B a buffer and then signal B gets closed anyway...
          Last edited by gripen; 12-16-2013, 10:23 AM. Reason: corrected numbers


          • #6
            It is based on the balance of the account and the drawdown of that specific signal.

            Signal B will not be effected as this is based on a per signal figure.


            • #7
              Great thank you so much for your replies Will and Daniel. Using gripens example.

              If he sets signal B drawdown limit to 6%

              6% = $300

              So once that PARTICULAR signal got to -$300 it would be closed. (therefore he would not get to -$400) - obviously ignoring if its a massive trade and it fast moving makret like news where the copier only checking every 20 secs or so. CORRECT?

              Also as a another more specific example we have Viper's last trades.

              I were to run 3x risk WITH a 6% max DD limit on a $1000 account

              He opens 1st UC short and it goes to -2% on the master therefore it will be closed on my account @ -$300 after 3 hours or so. He then opens his second trade some hours later the next morning which also goes to -2% on the master therefore closing another 6% on my slave terminal. Meanwhile his 1st UC short has gone -4% drawdown on the master so in total master is down -6% but my slave is down -%12 (instead of -18%) HOWEVER I am not currently in the trade. So I can't win but I also cant lose anymore. That being said it is highly likely that the recent UC short trades would have been averted as the 2nd UC short was actually quite profitable for some time, o I likely would of been stopped out on the first trade by the max DD limit but would have made that money back with the 2nd trade. Food for thought.

              I thought it would interesting if you were running Viper on a massive multiple....but now I am, likely going to not run on more than 2 as I lost a small fortune on the 3x and 4x risk that I had for Viper previously when I got MC. Anyway I'm sure someone could try it...


              • #8
                So I have figured this out the hard way, by experience.

                I had a EU short open and EU was going south. This was a very good position. Let's call this position 1 / signal 1.

                Now, at the same time, a signal opened from signal 2 (let's call it position 2). This was a long position with a higher lot size.

                Position 2 eventually caused some drawdown as EU continued going down. I had both 1 and 2 configured to close on 50%*. What happened? 50% DD was reached due to Position 2 and both 1 and 2 closed. This screwed me over as it would have been great to close 2 and keep 1 running.

                So, the % is global. My assumption was that it was only that specific signals contribution. In my case above, 50% meant signal 2 should have closed later (position 1 was "helping" the situation). Position 1 should never have closed. So my assumption was completely false.

                I hope this post is useful to some planning to use this feature. I'm disabling it from here.

                *not exact numbers


                • #9
                  Is the post just above correct? If one signal reaches the drawdown setting do all positions get closed across signals? I understood differently from the posts before that. Thanks in advance for the clarification.