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Max Drawdown Setting

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  • Max Drawdown Setting

    I have a question regarding max drawdown. The max drawdown setting on the ST Website refers to max drawdown for all open signals for a particular trader, but in the case of Siam Razor where you can have multiple quick trades in succession leading to a say 40% loss - would the max drawdown setting still work (assuming it was set at 20%) ? I'm assuming no, but asking for clarification.

    If not, what steps can I take to ensure that the maximum loss causes by the trader (in this case Siam Razor) due to a multiple of small trades in quick succession, does not exceed 20% of my total capital?

  • #2
    You can set risk multiplier to x0.5 but you will also have lower growth. If you want to duplicate their growth(x1 risk) you must set max dd to 40% otherwise your trades might be closed if dd reaches 20% assuming your setting is 20%. Risk is part of the game.

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    • #3
      Ricoguy, you misunderstand the question. The point of the question was to ask if the max drawdown setting only applies to open trades (as we all assume it does), but what if Siam Razor loses 1% over 40 trades in the span of 3 hours? It's a high frequency trader and if you look at their history there have been a string of 10-20 trade losses at a time. So the point of the question is would the max DD setting still work? What settings can we utilise to ensure that trading stops when losses due to a multiple of small trades do no exceed X% of total capital.





      Originally posted by ricoguy View Post
      You can set risk multiplier to x0.5 but you will also have lower growth. If you want to duplicate their growth(x1 risk) you must set max dd to 40% otherwise your trades might be closed if dd reaches 20% assuming your setting is 20%. Risk is part of the game.

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      • #4
        the max DD will work the second the DD of open trades reaches the limit set, in which it will close all open trades at once, the type of trading has nothing to do with how it works, it is a hard limit set by a software, so it won't consider the type of trading or how long does trades stay in average, once the limit is hit it will close the trades in the same instance

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        • #5
          I have not fully understood the logic behind the copier closing ALL trades when the Max DD setting is exceeded. I would much prefer it to close enough trades to bring the DD below the setting. In the case of Viper this has caused me to not use this feature.

          Cheers,
          Rod

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          • #6
            This is a nice idea that needs to be directed to Will
            But which trades will be closed? The ones with bigger dd, or the newer ones?

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            • #7
              The issue I forsee with something like this is it totally changes the strategy of the signal provider. The max DD feature is really there as a safety measure that can be utilised if you so wish. If we started closing out only a portion of the trades it could have some fairly interesting results.

              I will take it into consideration but its not something we would be looking to develop at this time I'm afraid.

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