Case#: GATS-001 using 28 Major Currency Pairs
Let us assume that you have a $200,000 account with a profit target of 10% in 365 days with a maximum trailing loss 5% allowed. We will use the 28 major forex pairs with a Reward to Risk ration of 3:1. What would be your daily profit target, daily profit target per trading instrument, daily allowable loss, daily allowable loss per trading instrument
Global Algorithmic Trading Software
To configure the risk management settings in Global Algorithmic Trading Software (GATS) based on your given criteria, let’s break down the information provided and calculate the necessary targets and limits.
Account Size: $200,000 Profit Target: 10% in 365 days Maximum Trailing Loss: 5% Number of Trading Instruments: 28 major forex pairs Reward to Risk Ratio: 3:1
- Annual Profit Target: The profit target for the entire year is 10% of the account size.
Annual Profit Target = Account Size * Profit Target Percentage Annual Profit Target = $200,000 * 0.10 Annual Profit Target = $20,000
- Daily Profit Target: Now, let’s calculate the daily profit target by dividing the annual profit target by 365 days.
Daily Profit Target = Annual Profit Target / 365 days Daily Profit Target = $20,000 / 365 Daily Profit Target ≈ $54.79
- Daily Profit Target per Trading Instrument: To find the daily profit target per trading instrument, divide the daily profit target by the number of trading instruments (28 major forex pairs).
Daily Profit Target per Trading Instrument = Daily Profit Target / Number of Trading Instruments Daily Profit Target per Trading Instrument = $54.79 / 28 Daily Profit Target per Trading Instrument ≈ $1.96
- Maximum Trailing Loss: The maximum trailing loss allowed is 5% of the account size.
Maximum Trailing Loss = Account Size * Maximum Trailing Loss Percentage Maximum Trailing Loss = $200,000 * 0.05 Maximum Trailing Loss = $10,000
- Daily Allowable Loss: To calculate the daily allowable loss, we need to find the relationship between the Reward to Risk ratio and the daily profit target.
Risk = (Daily Profit Target / Reward) * Risk Risk = ($54.79 / 3) * 1 Risk ≈ $18.26
So, the daily allowable loss is approximately $18.26.
- Daily Allowable Loss per Trading Instrument: Finally, let’s find the daily allowable loss per trading instrument by dividing the daily allowable loss by the number of trading instruments (28 major forex pairs).
Daily Allowable Loss per Trading Instrument = Daily Allowable Loss / Number of Trading Instruments Daily Allowable Loss per Trading Instrument = $18.26 / 28 Daily Allowable Loss per Trading Instrument ≈ $0.65
To summarize:
- Daily Profit Target: $54.79
- Daily Profit Target per Trading Instrument: $1.96
- Daily Allowable Loss: $18.26
- Daily Allowable Loss per Trading Instrument: $0.65
Please note that these calculations do not consider trading costs, such as spreads or commissions, which may impact the actual results. Additionally, the forex market is subject to fluctuations, and past performance does not guarantee future results.
Case#: GATS-002 using 7 Major Currency Pairs
Let us assume that you have a $25,000 account with a profit target of 10% in 180 days with a maximum trailing loss 5% allowed. We will use the 7 major forex pairs with a Reward to Risk ration of 3:1.
What would be your daily profit target, daily profit target per trading instrument, daily allowable loss, daily allowable loss per trading instrument
To help you configure the risk management settings in Global Algorithmic Trading Software (GATS), let’s break down your requirements and calculate each target accordingly.
- Account balance: $25,000
- Profit target: 10% in 180 days
- Maximum trailing loss: 5%
- 7 major forex pairs
- Reward-to-Risk ratio: 3:1
First, let’s determine the total profit target and then the daily profit target: Total profit target = Account balance * Profit target percentage Total profit target = $25,000 * 10% = $2,500
Daily profit target = Total profit target / 180 days Daily profit target ≈ $2,500 / 180 ≈ $13.89
Now, let’s determine the daily profit target per trading instrument: Daily profit target per trading instrument = Daily profit target / 7 forex pairs Daily profit target per trading instrument ≈ $13.89 / 7 ≈ $1.98
Next, let’s calculate the daily allowable loss: Daily allowable loss = Account balance * Maximum trailing loss percentage Daily allowable loss = $25,000 * 5% = $1,250
Daily allowable loss = Total allowable loss / 180 days Daily allowable loss ≈ $1,250 / 180 ≈ $6.94
Now, let’s determine the daily allowable loss per trading instrument: Daily allowable loss per trading instrument = Daily allowable loss / 7 forex pairs Daily allowable loss per trading instrument ≈ $6.94 / 7 ≈ $0.99
In summary, for your given risk management settings, the following figures should be used:
- Daily profit target: $13.89
- Daily profit target per trading instrument: $1.98
- Daily allowable loss: $6.94
- Daily allowable loss per trading instrument: $0.99
Please note that these calculations are for illustrative purposes only and should not be considered as financial advice. Additionally, real-world trading results may vary due to factors such as market volatility, execution slippage, and other unforeseen circumstances.