Equity Governance States for Automated Trading Systems
Summary
This article presents an account-level risk supervisor for MQL5 that sits above a strategy’s entry and exit rules. It tracks equity, peak-to-current drawdown, daily loss, and rapid declines, then assigns one of four operating states: NORMAL, CAUTION, RESTRICTED, or LOCKDOWN. Restrictions can include reducing lot size, limiting open positions, enforcing time between trades, and blocking new orders. Cooldowns and recovery checks are intended to prevent the system from returning to normal too quickly or switching states repeatedly.
The implementation separates monitoring, state transitions, restrictions, trade authorization, logging, and display into components, with a central authorization check before order execution. The article reports backtests in which the governor reduced drawdown expansion and excessive trading while improving execution stability, but the supplied excerpt gives no detailed test design, parameter values, or numerical results. These claims therefore offer limited evidence of general effectiveness; thresholds and recovery rules require validation for each account and strategy.
Key ideas
- An independent governance layer can regulate trading without changing a strategy’s entry and exit logic.
- Drawdown, daily loss, rapid equity declines, cooldowns, and recovery checks drive four execution states.
- A central authorizer can combine state permissions with restrictions and hard account limits.
- The reported backtests lack enough detail in the excerpt to establish how broadly the results generalize.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.