Help calculating max equity needed

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JJLL
Posts: 47
Joined: Sat Jun 06, 2009 8:50 pm

Help calculating max equity needed

#1 Postby JJLL » Tue Feb 28, 2017 11:10 am

Hello,
I'm overlooking part of my calculation and I can't seem to figure out what I'm missing :)

My goal is to calculate the total amount of equity needed to trade through a period of max. draw down. I have examples below. The first picture shows my settings for the EUR/USD and the max draw down period for that statement.

How much capital has to be deposited within the account so that I can trade through this period and not blow out the account? This second picture is of an account statement when the max. draw down occurred.

settings.jpg
settings.jpg (112.7 KiB) Viewed 229 times


If anyone is interested, I can send you the actual spreadsheet. Right now, it takes approximately $15,000 to withstand this period of draw down. I'm hoping to get more accurate. I'm trying to create or find a formula that will tell me an exact amount.

Any help would be greatly appreciated!
Thank you.
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spreadsheet.jpg
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FX Helper
Posts: 873
Joined: Mon Apr 01, 2013 3:55 am

Re: Help calculating max equity needed

#2 Postby FX Helper » Thu Mar 02, 2017 8:22 am

Hello,

According to my info, the total loss of these orders can be -10207.08 (if all these 15 orders are losing).

Please note that you can also find the "Max drawdown" option in the "Statisctics" window and check its value, maybe it will help you.

JJLL
Posts: 47
Joined: Sat Jun 06, 2009 8:50 pm

Re: Help calculating max equity needed

#3 Postby JJLL » Fri Mar 03, 2017 2:32 pm

Thank you for your reply.

You wrote, "According to my info, the total loss of these orders can be -10207.08 (if all these 15 orders are losing)."

You may want to double check the numbers. The 15th trade made a profit. If you add up the first 14 trades (all loosing) you will have a loss of -5074.68

According to the exported spreadsheet from the account history, the max draw down was -6622.22

Here's actually why I'm posting. Below is a screen shot of the same trading period. The max draw down in the statistics window shows an amount of 6607.82

So which is correct? The amount in the statistics window or the amount in the Min Equity column on the exported account history?

Can you please tell me the exact calculation that FT3 uses to calculate Max Draw Down?

Thank You.
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statistics.jpg
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FX Helper
Posts: 873
Joined: Mon Apr 01, 2013 3:55 am

Re: Help calculating max equity needed

#4 Postby FX Helper » Sun Mar 05, 2017 7:13 am

Hello,

I received -10207.08 by summing all 15 orders with loss. So I received -6622.22 for your 14 orders and then added -5132.40.

I thought that you need to know how much equity do you need to have if all these orders are losing orders.

The "Max drawdown" value in the "Statistics" tab is completely correct.
A drawdown is the reduction of one’s capital after a series of losing trades. This is normally calculated by getting the difference between a relative peak in capital minus a relative trough.
"Max drawdown" shows the biggest of these values.

JJLL
Posts: 47
Joined: Sat Jun 06, 2009 8:50 pm

Re: Help calculating max equity needed

#5 Postby JJLL » Fri Mar 17, 2017 12:05 pm

Hello,
Yes, you are almost correct. You wrote, "I thought that you need to know how much equity do you need to have if all these orders are losing orders." I'm trying to calculate the amount of capital/equity needed in order to withstand or successfully trade through this period of maximum drawdown.

You wrote, "This is normally calculated by getting the difference between a relative peak in capital minus a relative trough.
"Max drawdown" shows the biggest of these values."

I agree. So is it safe to say that if I add all of the negative amounts in the Min. Equity column that will tell me how much negative equity the account experienced? In this example, the Min Equity is:

-3.90
-3.90
-7.80
-15.60
-31.20
-58.08
-109.20
-218.40
-222.30
-331.50
-499.20
-752.70
-1131.00
-1704.30
-1533.14

Total - -6622.22 (keep this number in mind for what's shown below)



In FT3 under Symbol Properties, I check off the box entitled, "use leverage info to calculate" which is 100:1 and my lot size is 100,000

I've attached two links below. The first is a video showing your total loss amount of -10,207.08 (this amount is already 54.13% over the total amount of Min. Equity, -6622.22)

You can see in the account history that the initial deposit is 10,207.08

Now remember, you calculated the total amount of loss for ALL 15 trades, when really there are only 14 loosing trades. But for the sake of example, I added the theoretically loss.

In the video, you will see that I can not get past a trade with a lot size of 4.37.

http://4seasonsonline.com/FX/10207.mp4

The second video shows how I am able to trade through the period of max draw down with a deposit of 14,000. This amount of 14,000 is 111.40% greater than total amount of Min. Equity, -6622.22

I've tried using the amount of 13,750 and lesser amounts as a deposit but was still unable to trade past the lot size of 4.37

With the strength of FT3, I should be about to find/calculate and exact amount. For example, maybe I need 13,985 instead of 14,000. If you're wondering how I found the amount of 14,000... I did a number of back test in which I simply guessed the deposit amount.

http://4seasonsonline.com/FX/14000.mp4

As you can imagine, I don't like to spend time guessing :)

I appreciate your help and if anyone has any ideas or better yet, an explanation or formula to calculate MDD in FT3, I'd be very thankful.

FX Helper
Posts: 873
Joined: Mon Apr 01, 2013 3:55 am

Re: Help calculating max equity needed

#6 Postby FX Helper » Sun Mar 19, 2017 6:20 am

Hello,

Yes, correct, if you sum all values in the "Min Equity" field, you will receive the maximum possible drawdown during trading.

As for the video:

As I can see, the last opened order had 4.37 lot.
What lot should the next order have?
As I can see, you have only 5140.2 USD left so if the next order has lot size bigger than 5.14, our software can't open it because of insufficient margin.
If you want to place bigger orders, you will need to deposit more money to your account, or increase the leverage.


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