Some high risk/returns automated trading systems requires an on/off switch as a fail-safe feature and to minimize drawdowns.

Besides using a moving average on the equity P&L curve to turn on/off the trading program, what other creative risk management ways are fund managers using?

I have my program running on both a demo and a real account. If real account gets a drawdown ≥10%, the program on the real account is turned off but the demo continues running.

If the balance on the demo recovers by ≥5%, the real account is re-activated but trades at half of the previous position %size until the drawdown is fully recovered.

If, however,the demo never recovers at all and gets another 15% drawdown, the trading system is discarded.

Is there a way to improve this money management strategy?



Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.