Sizing Multi-Currency Strategies to a Target Drawdown
Summary
The article defines a way to scale strategy positions in a multi-strategy Expert Advisor using a normalized balance. First, test a fixed lot size over a chosen period, measure maximum equity drawdown, and set the fitted balance so that drawdown corresponds to a chosen fraction, illustrated as 10%. Position size then scales with the ratio of allocated balance to fitted balance, subject to broker lot-step rounding.
It distinguishes fixed lots, constant sizing against an allocated balance, and variable sizing against the current balance. Test examples compare these approaches and show that scaling can keep observed relative drawdown near the chosen target while distributing capital among strategy instances. The method uses fixed-size virtual orders and recalculates their real position sizes. Historical tests can help tune allocation, but the article cautions that drawdown behavior on unseen periods is not guaranteed; results also depend on the test period and rounding.
Key ideas
- A fitted balance is derived by comparing maximum historical equity drawdown with a chosen drawdown fraction.
- Position size scales in proportion to allocated balance relative to fitted balance.
- The article separates fixed-lot, constant-balance, and current-balance sizing approaches.
- Lot-step rounding can make realized risk differ slightly from the target.
- Backtest drawdown does not guarantee the same drawdown on unseen periods.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.