Comparing Risk-Managed and Unmanaged Strategy Simulations

# How to reactivate a risk mangement rule in an automated process


# How to reactivate a risk mangement rule in an automated process












If some conditions are met (stop loss, trailing stop, take profit...) we will close ours positions (sell/buy) to avoid having more loss or to ensure profit. In an automatic trading system, it is easy to set-up these rules.

But is there an automated strategy / rule to re-activate our strategies? For example:

- simulate our P&L if we have no risk management rule; and then reactivate ours positions if the simulated drawdown or run up reaches a certain value

- reactivate after two days

- reactivate at the end of the current month?

Or is this part of an "automated" trading in fact manually done?

## Answer by Matt Wolf (score 2, accepted)

https://quant.stackexchange.com/a/4860

I strongly assume you are talking about a simulated environment, only. Risk management rules are there for a purpose, adhere to them or throw them overboard entirely at your own peril. Having said that if you want to purely simulate how P&L, equity curve, and draw-down among others would have behaved had you not squared the positions due to targets or stops reached then you could do the following:

Simply run identical strategies in parallel, same strategy logic inside except that one generates orders with attached targets and stops and the other generates orders without the bracket order. In that sense you will generate the same trade entries (given you are not subjecting your system to constraints that would prevent the system from generating orders because certain risk limits would otherwise be breached) but the exits will be different.

However, in the end you still need to set a mechanism of how to close positions.

If you are merely after investigating how P&L had traversed n-time units post the trade closure, given the trade was not closed, then there are way easier things to run for example in R.

## Answer by IgorS (score 0)

https://quant.stackexchange.com/a/7622

I agree with @Freddy, that we are talking about backtesting trading strategy in simulation environment.

Somehow you opened those positions - that means you have some trading strategy, the strategy which gives you enter (and probably exit) signals. There are two cases:

- You CAN formalize and automate this strategy.

- You CAN'T do it for any reasons.

(1) What you are doing in the first case: is getting some trading simulation software (like Amibroker) or develop some backtesting utility yourself. And simply overlie your trading strategy signals with different risk management indicators (trailing stops or some bands) and get optimal stop values.

(2) Use a set of historic trades which you already did as an input for simulation tool. And again run it with trailing stops.