Log in to see Cloud of Tags

Wealth-Lab Wiki

Drawdown / Runup

This PosSizer is a combination of two money management approaches:

  • Increase/decrease trade size when the portfolio equity is setting new highs
  • Increase/decrease trade size when the portfolio equity is in drawdown

And in between, one of the three Wealth-Lab's standard position sizing choices are applied: fixed dollar, percent of equity, or maximum risk percent.

You have the option to increase or reduce trade size during equity runups. Setting it to 0 effectively disables this behavior, letting the PosSizer control downside risks only.

Another option lets you specify the drawdown depth after which the PosSizer will start altering the size (to the upside or to the downside). (Enter 0% to disable the position sizing adjustment during drawdowns.) By default, position size is reduced but you can direct the PosSizer to increase the size during drawdowns (see: Martingale)

The checkbox "Per each % of drawdown" changes the logic of adjustment in that you keep risking less and less if your drawndown is getting bigger and bigger (or more and more, if you select the "Increase size" option). In other words, activating this option makes you risk progressively less: for example, when your position size is 10% equity and 10% reduction is specified after reaching a 10% drawdown, for every 10% of drawdown you will risk 10% less, so at 10% drawdown and below the position size is 9%, after reaching a 20% drawdown the size is further cut to 9% - (10% of 9%) = 8.1% and so on.


Important Disclaimer: The information provided by Wealth-Lab is strictly for informational purposes and is not to be construed as advice or solicitation to buy or sell any security.  The owner of Wealth-Lab.com assumes no liability resulting from the use of the material contained herein for investment purposes. By using this web site, you agree to the terms of this disclaimer and our Terms of Use.

ScrewTurn Wiki. Some of the icons created by FamFamFam.