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Synamic Equity Allocation (DEA)
Here is something I've been playing with for Stock traders. Let's say you had a system you wanted to deploy and wanted the system to run across 10~20 stocks (or more). Without dynamic equity allocation, you would have to set each system to trade x # shares (like 1000) - which means you would not be using your equity to maximize your systems ability to profit.
The solution is to dynamically allocate equity for each trade. The way I've handled this is to create a MASTER program that loads and establishes global variables based on a user defined file (stored in the FormulaOutput folder).
The DEA_Master.txt file (stored in the FormulaOutput folder) contains....
Total_Capital = 500000
Capital_Reserve = 0.15
Allocation_Percent = 0.5
explained....
Total_Capital = 500000 // total capital to trade
Capital_Reserve = 0.15 // % of capital to hold in reserve
Allocation_Percent = 0.5 // % to allocate to each trade
This means, if you start with $500,000, then reserve 15%, your working capital will be $425,000. Now, each trade will attempt to allocate 50% of the remaining working capital..
So, if your system fires off the first trade, approx $212K will be allocated to that trade. If another trade is fired off, then $106K will be allocated. If trade #1 completes, then the equity used in that trade will be ADDED back to working capital - thus allowing the #3 trade to use more capital.
The MASTER program acts as a control system that accomplishes/allows the following...
1. No SLAVE programs will run unless MASTER is LOADED and ON
2. MASTER reads and establishes the global variables needed to allocate equity across multiple SLAVES
3. MASTER program includes a LOCK system that prevents equity to be allocated at the same time - thus keeping it safe.
4. MASTER program includes user-inputs for MIN/MAX shares to trade. If the DEA results in # shares BELOW minimum, the trade is ignored.
The SLAVE program acts as a trade execution system that accomplishes/allows the following...
1. SLAVE programs SIMULATE trading and dynamically allocate equity.
2. SLAVE program calculates # of shares rounded to the 100 lots.
3. SLAVE program pulls and puts equity to/from the working capital variable.
4. you can run as many SLAVE programs as you want to trade from the equity pool.
The purpose of something like this is to MAXIMIZE your trading equity. For example, if you traded 5 stocks @ 1000 shares each and profited $500 from all trades, but actually had $250,000 in your trading account. By dynamically allocating your equity, you potentially could have profited by 4~8* the $500. Of course, the reverse is also possible (generating larger losses as you are trading larger ## of shares). But the point behind this tool is to allow traders to maximize their potential by USING their capital FULLY to attempt to profit from their trades.
This is relatively new - so there might be little bugs - but I've tested it pretty well. This is something that I will eventually "fill out" with more features and offer on my site. Feel free to enjoy the features of this unique tool.
Here is something I've been playing with for Stock traders. Let's say you had a system you wanted to deploy and wanted the system to run across 10~20 stocks (or more). Without dynamic equity allocation, you would have to set each system to trade x # shares (like 1000) - which means you would not be using your equity to maximize your systems ability to profit.
The solution is to dynamically allocate equity for each trade. The way I've handled this is to create a MASTER program that loads and establishes global variables based on a user defined file (stored in the FormulaOutput folder).
The DEA_Master.txt file (stored in the FormulaOutput folder) contains....
Total_Capital = 500000
Capital_Reserve = 0.15
Allocation_Percent = 0.5
explained....
Total_Capital = 500000 // total capital to trade
Capital_Reserve = 0.15 // % of capital to hold in reserve
Allocation_Percent = 0.5 // % to allocate to each trade
This means, if you start with $500,000, then reserve 15%, your working capital will be $425,000. Now, each trade will attempt to allocate 50% of the remaining working capital..
So, if your system fires off the first trade, approx $212K will be allocated to that trade. If another trade is fired off, then $106K will be allocated. If trade #1 completes, then the equity used in that trade will be ADDED back to working capital - thus allowing the #3 trade to use more capital.
The MASTER program acts as a control system that accomplishes/allows the following...
1. No SLAVE programs will run unless MASTER is LOADED and ON
2. MASTER reads and establishes the global variables needed to allocate equity across multiple SLAVES
3. MASTER program includes a LOCK system that prevents equity to be allocated at the same time - thus keeping it safe.
4. MASTER program includes user-inputs for MIN/MAX shares to trade. If the DEA results in # shares BELOW minimum, the trade is ignored.
The SLAVE program acts as a trade execution system that accomplishes/allows the following...
1. SLAVE programs SIMULATE trading and dynamically allocate equity.
2. SLAVE program calculates # of shares rounded to the 100 lots.
3. SLAVE program pulls and puts equity to/from the working capital variable.
4. you can run as many SLAVE programs as you want to trade from the equity pool.
The purpose of something like this is to MAXIMIZE your trading equity. For example, if you traded 5 stocks @ 1000 shares each and profited $500 from all trades, but actually had $250,000 in your trading account. By dynamically allocating your equity, you potentially could have profited by 4~8* the $500. Of course, the reverse is also possible (generating larger losses as you are trading larger ## of shares). But the point behind this tool is to allow traders to maximize their potential by USING their capital FULLY to attempt to profit from their trades.
This is relatively new - so there might be little bugs - but I've tested it pretty well. This is something that I will eventually "fill out" with more features and offer on my site. Feel free to enjoy the features of this unique tool.