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Ubzen
5394
Ubzen 2013.08.31 21:55 

Ok, I suck at mathematics. Therefore my question is derived mostly from a numbers angle. However anyone with multi_currency or diversification experience could help.

Lets say my expert advisor looks for $1 take profit when back-testing on single_currency pair. I get results as follows on different pairs after 2012 year back-test. The numbers below are just for this case study and not actual back-test numbers ;)

  • Symbol     $Maximum_DrawDown     $Annual_Return
  • EurUsd      $500                               $1100
  • AudUsd     $300                               $1000
  • GbpUsd     $2000                             $1100
  • UsdCad     $200                               $900
  • UsdChf      $500                               $900
  • UsdJpy      $3000                             $800 
  • EurChf       $150                              $300
  • EurGbp      $1000                             $800
  • EurJpy       $3000                             $1000

My biggest question here is, should I trade all the above currency in single_currency mode. Or should I have all currency aim for the $1 profit then close_all?

Other questions.

-Should I only trade UsdCad because it gives me the best Return/Drawdown value?

-Should I exclude the pairs with the biggest drawdowns i.e (jpy) denominated pairs?

*Note, I want to trade as many pairs as possible because I believe they all have positive expectations. However, some seem to have more risk than others. Also, by having all target the same goal, I feel like I'm paying too much spreads for the buck. Help.

Biantoro Kunarto
14806
Biantoro Kunarto 2013.09.02 03:04  

Hi Ubzen,

In my opinion, you can use multi currency with volume of lot calculation based on percentage of Drawdown or based on Annual Return

  • Based on Drawdown ( bigger draw down means smaller percentage )
  • Based on Annual Return ( bigger Annual Return means bigger percentage )
  • Or using both 
Example :
          Symbol     $MaxDrawDown     % based on Drawdown     $Annual_Return     % based on Annual Return
  • EurUsd      $500                        9.45 %                                 $1100                      13.92%
  • AudUsd     $300                        15.75 %                               $1000                       12.66 %
  • GbpUsd     $2000                      2.36 %                                 $1100                       13.92 %
  • UsdCad     $200                        23.62 %                               $900                        11.39 %
  • UsdChf      $500                        9.45 &                                 $900                        11.39 %
  • UsdJpy      $3000                      1.57 %                                 $800                        10.13 %
  • EurChf       $150                       31.5 %                                 $300                        3.8 %
  • EurGbp      $1000                     4.72 %                                 $800                        10.13 %
  • EurJpy       $3000                     1.57 %                                 $1000                       12.66 %
          Total         $10650                                                              $7900        
Ubzen
5394
Ubzen 2013.09.02 03:30  

Very good idea. Adjust my lot-size according to my [fear|greed] or [risk|return]. I'll attempt using draw-down% as a guide for the lot_sizes. Thank You :) Interesting what happens to EurChf. Based on drawdown, it wants me to bet_more. However based on returns, it wants me to bet_less. What do you make of that? 

Simon Gniadkowski
Moderator
17998
Simon Gniadkowski 2013.09.02 09:07  
Ubzen:

Very good idea. Adjust my lot-size according to my [fear|greed] or [risk|return]. I'll attempt using draw-down% as a guide for the lot_sizes. Thank You :) Interesting what happens to EurChf. Based on drawdown, it wants me to bet_more. However based on returns, it wants me to bet_less. What do you make of that? 

Are you looking at DrawDown and return as a $ figure or a percentage ?
Ubzen
5394
Ubzen 2013.09.02 10:01  
RaptorUK: Are you looking at DrawDown and return as a $ figure or a percentage ?
Both actually. The Starting Deposit is $10,000 if that helps. I want the default view in $_Dollars because those are the minimum losses it can sustain given my broker's minimum_lot and current money_management.
Simon Gniadkowski
Moderator
17998
Simon Gniadkowski 2013.09.02 10:42  
Ubzen:
Both actually. The Starting Deposit is $10,000 if that helps. I want the default view in $_Dollars because those are the minimum losses it can sustain given my broker's minimum_lot and current money_management.
EURCHF has the smallest $ DD but the largest %age DD wouldn't basing your decision on the $ DD suggest you should bet_more but based on the %age bet_less ?  hence my question . . . 
Ubzen
5394
Ubzen 2013.09.02 11:08  
RaptorUK: EURCHF has the smallest $ DD but the largest %age DD wouldn't basing your decision on the $ DD suggest you should bet_more but based on the %age bet_less ?  hence my question . . . 
Those %tages aren't provided by me. EurChf has the lowest_dd in % and the lowest_return in %. biantoro is suggesting that I wager 31.5% on EurChf when basing my decision from a Risk_Adverse [minimize my drawdown] point_of_view. However, from a Risk_Taker [maximize my returns], his money_management suggests that I wager 3.8%. At least thats how I interpreted it.

Simon Gniadkowski
Moderator
17998
Simon Gniadkowski 2013.09.02 11:27  
Ubzen:
Those %tages aren't provided by me. EurChf has the lowest_dd in % and the lowest_return in %. biantoro is suggesting that I wager 31.5% on EurChf when basing my decision from a Risk_Adverse [minimize my drawdown] point_of_view. However, from a Risk_Taker [maximize my returns], his money_management suggests that I wager 3.8%. At least thats how I interpreted it.

Ah,  sorry . . . I see now.  
Ubzen
5394
Ubzen 2013.09.02 11:46  
RaptorUK: Ah,  sorry . . . I see now.  

Its all good. As I suspected, the percentages sums up-to 100%. Therefore, I can break my 10k deposit down into those parts and assign them to the corresponding symbols. Also another way of looking at it would be to Scale them down. Example: EurUsd = 0.09 lots | AudUsd = 0.15 lots | UsdJpy = 0.01 lot | EurChf = 0.31 lots and Etc... Using 0.31 as the base_lot for EurChf is somewhat scary but given the low draw-down this makes sense.

On the other hand, I cannot see why EurChf gets hit so hard because of it's low returns. Its like polar opposites | from biggest size to smallest size. 

Stephen Njuki
5179
Stephen Njuki 2013.09.10 08:35  
What if you use a notional 'yield'.... where by you take it that the drawdown amount represents the minimum investment required for each currency, and the return is then expressed as a percentage of this drawdown amount. The resulting percentage yields you get can then represent weightings for allocation in a portfoio if you want to invest in all currencies...
Ubzen
5394
Ubzen 2013.09.11 15:41  
ssn: What if you use a notional 'yield'.... where by you take it that the drawdown amount represents the minimum investment required for each currency, and the return is then expressed as a percentage of this drawdown amount. The resulting percentage yields you get can then represent weightings for allocation in a portfoio if you want to invest in all currencies...
Good Idea... Thank You.
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