Hello,
Normal lot is $100000. So, with 8 lots (each $100000), real position
size is $800000. You should read the documents of your broker
and you will see. In such case, if currency changes as little as 1% down
(such fluctuations are happenning on currencies virtually every day!)
you are LOSING $8000 on that position. That is where your loses coming
from. Your initial equity evaporates that way. When your equity drops
below zero you will receive margin call (and you need
to deposit MORE MONEY to your account to keep it alive) or your broker
will liquidate your position immediatelly and close your account.
Backtester will not pick up the phone and call you, instead it will show
you the same thing using numbers. That is what negative backtest result
tells you - how much money you would need to deposit during entire
period under test (how far underwater you are and how much more money
you would need to have at start not to become bankrupt). For stocks, it
will stop when your account is zero because there is a built-in -99.8%
ruin stop for stocks, but for highly-leveraged (1:100 as in your case)
undercapitalised accounts it is possible to wipe account and go negative
in a matter of seconds (for example when you got 8-lot open position
worth nearly $1 million when you got only $10K account) when Fed is
announcing rate decision.
Again: that is what backtest results are telling you: you are way way
undercapitalised.
Best regards,
Tomasz Janeczko
amibroker.com
On 2010-02-03 06:04, İlhan Ketrez wrote:
Thank you for your prompt replies.
Please find below my answer to both Aron and Tomasz:
Negative test results are very late indication of insufficient funds.
Falling of the equity level below total maintenance margin means I
need to deposit extra money. And this level is far above zero.
To inspect this we need to trace these values in backtest. The mistake
in current beacktest procedure is:
You open a position for example 8 lots with $1000 margin deposit. The
real position size is then $8000 and this is constant until you close
the position if the position is a winner. The cash amount should
change in accodance with price change and pointvalue. If the position
is a loser, and if the account is $10000, you first lose the $2000
cash. Then the $8000 position value goes down until it reaches to
maintenance deposit.
To sum up, in the current backtest procedure PositionSize is changing
instead of the cash (available funds).
Please check it up.
Best regards,
Ilhan
2010/2/3 Tomasz Janeczko <[email protected]
<mailto:[email protected]>>
Hello,
In other words negative result tells you how much extra cash you
would need to deposit on your account
to keep trading. This is margin call. Either you deposit extra
money or you say good bye to your account.
Best regards,
Tomasz Janeczko
amibroker.com <http://amibroker.com/>
On 2010-02-03 01:22, Tomasz Janeczko wrote:
Hello,
Well, certainly with $10000 account then in fact you should not
trade forex at all, because you are undercapitalized and this is
straight way to blow you account, at that is precisely what
backtest results tell you.
Best regards,
Tomasz Janeczko
amibroker.com <http://amibroker.com/>
On 2010-02-02 21:07, İlhan Ketrez wrote:
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Hello,
If I have 10,000 and if the initial margin is 1000, can't I open
8 lots? Then what does the initial margin mean?
If Amibroker trades far away from margin call everything works
perfectly. For example if I have 100,000 and trade one contract,
there is no problem. Amibroker takes the position value,
multiplies it with the price difference... These are OK. The
document you suggest mainly explains these essential details
and some basic
concepts (http://www.amibroker.com/kb/2006/08/09/amibroker-for-forex/) .
In forex & futures, the trick is to be able to trade near limits
without getting caught by the limits. And there is nothing in
Amibroker about these limits as far as I see. Moreover, it seems
that it is impossible to formulate a correct custom backtest
procedure due to improper handling of PositionSize and read-only
Equity and Cash variables in CBI.
I wonder your additional comments on the subject,
especially your answer to my first two questions. The final
equity becomes -378,320 with 10,000 initial equity with the
same settings. Attached you may find the formula file.
Best regards,
Ilhan
2010/2/2 Tomasz Janeczko <[email protected]
<mailto:[email protected]>>
Hello,
You are using wrong settings.
> Contract number is 800
That is wrong. No forex broker would allow you to open 800 lots.
You should use SetPositionSize( 1, spsShares ); to ensure
you are trading one lot
(or what every lots you really trade).
You need to read this:
http://www.amibroker.com/kb/2006/08/09/amibroker-for-forex/
Best regards,
Tomasz Janeczko
amibroker.com <http://amibroker.com/>
On 2010-02-02 18:37, İlhan Ketrez wrote:
Hello,
I am a registered user of Amibroker and have sent this
problem to Amibroker support before sending to the mailgroup.
By now, more than one week has passed and there is no reply.
I still do not want to believe that Amibroker cannot
perform a correct futures/forex bactest and I am afraid of
hearing that it can't. However, to me, my tests clearly
indicate that there's something wrong with the default
behaviour of "futures mode" backtesting. Shortly, you open
a position, and as the position be exhausted you still have
cash in your account. Even after the position size goes
below zero, you still have cash and may open a position if
you code accordingly. Ability of the position size to go
below zero may just be another discussion topic. There is
no such account in real life. Normally, the position size
does not change if the position is a winner and if the
position is a loser, it consumes the cash first, then
consumes itself down to the maintenance margin where the
broker liquidates the position.
All in all, my request from Amibroker stuff is to *either
invalidate my comments* by writing a few sentences *or
clearly accept that Amibroker cannot perform a correct
futures backtest* and stop misleading people.
Best regards,
Ilhan
2010/1/28 İlhan Ketrez <[email protected]
<mailto:[email protected]>>
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from =?UTF-8?Q?=C4=B0lhan_Ketrez?= included below]
Dear friends
I am trying to test a simple system and understand the
behaviour of Amibroker testing mechanism.
I have set up an AFL file very similar to the one
described here
<http://www.amibroker.com/kb/2006/08/09/amibroker-for-forex/>.
Testing period: 01.01.2008 - today
Initial equity: 1,000,000
Final equity: -38,033,810
The position size is -80.
Margin deposit: 1000.
First entry details are as follows:
Contract number is 800
Entry position size: 800,000. Cash: 200,000.
The details I find interesting are:
As the position grows position size also grows and cash
continues as 200,000.
Later, position size goes below zero as cash floats
constantly above zero.
The default result in Amibroker is something impossible
to encounter in real life. (To go into a debt of 38
million)
I defined a real cash value and observed the difference
via debugview.
Report and debugview log are attached including the
system codes.
I hope to find a way to test correctly using Amibroker
with your help.
Thank you very much in advance.
Regards,
Ilhan Ketrez
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eurusd.afl
<http://d.yimg.com/kq/groups/1010692/2139167900/name/eurusd.afl>
