Adjusting Position Size When a Strategy’s Equity Curve Falls

Summary

This example explains how to scale trade size according to a strategy’s own equity curve. It offers two ways to define a drawdown phase: compare a fast equity moving average with a slower one, or compare current equity with the slow average. When the selected condition signals weakness, the trader can reduce position size by a chosen percentage; the example also allows increasing size, which raises exposure during the same condition.

The equity-curve rule is layered onto an example trading system whose entries use Chande Momentum Oscillator crossings, momentum conditions, and SuperTrend. The document provides parameter settings and backtest configuration for BTC/USDT futures over roughly one month, but no performance results or comparison showing whether equity-based sizing improved risk-adjusted returns. The sizing adjustment depends on the chosen averages and percentage, and increasing size during a downturn can amplify losses. The method therefore describes a risk-control idea, not evidence that any particular setting is effective.

Key ideas

• Equity weakness can be identified by comparing fast and slow moving averages of strategy equity.
• An alternative rule reduces exposure when current equity falls below its slow moving average.
• The example adjusts position size by a specified percentage when the selected equity condition is met.
• The underlying entries combine momentum, oscillator, and SuperTrend conditions.
• The short BTC/USDT futures test settings are given without performance results or evidence that the sizing rule improves outcomes.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.