margin to equity ratio

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irish91001
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margin to equity ratio

Post by irish91001 » Tue Aug 21, 2012 4:54 pm

Am I understanding the Margin to Equity aspect correctly?

If I set the ratio to 50%, then my system will not take any trades that put it over the 50% limit of margin requirments?

While trading a basket of futures, I just want to ensure my backtesting is as accurate as can be and the potential of geting margin called is eliminated. Having 7-8 open trades may be unlikely especially during a drawdown period.

So, trades that eventually won, may have been been called for a loss or never taken.

Jake Carriker
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Post by Jake Carriker » Tue Aug 21, 2012 5:24 pm

The built in Margin to Equity limiter sums the margin requirement of the trade under consideration with the total current margin and compares this number to the margin limit. If it exceeds the limit the trade is rejected. However, it is still possible for a system that submits multiple orders per session, any one of which may not exceed the limit, to exceed the margin limit should multiple orders fill in the same session.

More sophisticated margin limiting logic is available using custom built Blox and Trading Blox Basic that would never allow a position to exceed margin limits.

LeapFrog
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Post by LeapFrog » Thu Aug 23, 2012 10:15 am

There is also the problem of what are the margin requirements per instrument. Sure, you can look up the exchange and read off the amount for today, but these have been quite volatile over the past 5 years especially and for that matter the past few decades.

AFAIK, historical margin requirments data is not available on more than a handful of instruments. FWIW, I have used current margin requirements and just assumed them for past backtesting to see what my systems would have done based on today's margin. But that is unrealistic for 15 - 30 years ago.

I ended up moving to a more stable measurement - Total Trading Equity to Total Assets Controlled (I made that term up). Or more simply, measure your system leverage.

Measure the leverage with something like:- (contracts * instrument.bigPointValue * instrument.unadjustedClose). Compare this to test.TotalEquity. A filter can then be applied to regulate exposure to a desired level.

In general I found that with the leverage held at a constant level, over a 30 year period the margin/equity measure was high in the early years and lower in the more recent years (what a surprise!). In other words, using today's margin rates 30 years ago over states the margin/equity ratio.

d82trade
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Calculating Margin and Equity

Post by d82trade » Mon Jan 14, 2013 5:23 pm

I am having some difficulty using the leverage function on the global parameter tab to represent equity + margin to generate accurate testing and orders.

I am using the leverage (fraction) and the max equity function.

Say I have 100K to start trading and I can use use up 100 % margin or a 2 : 1 ratio per trade. This would give me 200K to start trading with.

However, I only want to trade 30 % percent of availible margin or a total of 130K.

From my reading in the TB help PDF, the leverage function controls how margin is calculated

I thought to set the Max Equity function at 100 and the Leverage function to 1.30 and this would represent my initial equity + margin or 130K of equity to trade with.

However, when I run this test the trades that are simulated are higher than my available equity + margin.

I can't seem to find the right values in both Max Equity and Leverage (Fraction) to simulate equity + margin.

Without accurate settings to control margin this precludes back testing and order generation.

If I wanted to trade 100K of equity + 30K on margin, how do I set trading blox to accurate represent this figure?

Jake Carriker
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Post by Jake Carriker » Mon Jan 14, 2013 7:21 pm

See my answer at viewtopic.php?t=9873

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