Equity-Curve Filters for Dynamic Position Sizing
Summary
This strategy adjusts trade size according to whether the account's equity curve appears to be declining. It offers two detection methods: compare fast and slow simple moving averages of equity, or compare equity with its longer-period average. When the selected rule signals a downturn, position size can be reduced or increased by a configurable percentage. The example settings use a 9-period fast average, a 25-period slow average, and a 50% size adjustment; its illustrative reduction changes a 10% allocation to 5%.
Entries are generated separately using Chande Momentum, SuperTrend, and momentum conditions, so the equity filter affects sizing rather than defining the directional signal. The document warns that increasing size can amplify losses, poor parameters can make adjustments too aggressive, and sizing cannot remove systemic risk. It lists a brief BTC futures backtest configuration but gives no performance results, and notes that stop-loss logic needs consideration.
Key ideas
- The strategy estimates equity drawdown using moving-average comparisons on the equity curve.
- It can adjust position size up or down by a configurable percentage when a downturn is detected.
- Chande Momentum, SuperTrend, and momentum conditions generate the example's trade entries.
- Increasing exposure can amplify losses, and position sizing cannot eliminate broader market risk.
- Backtest settings are listed, but no performance results are supplied.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.