Mark Holstius Elite    Posts: 744 Joined: 10/11/2012 Location: Sleepy Hollow, IL  User Profile | Since there are so many times I’ll be referring to similar terms in this post, I’ll attempt to make it somewhat easier to keep track of them by “color coding” the terms to make them as close as possible to the colors I used when building the attached spreadsheet… Account Equity Strategy Allocation % Trading Equity $ Trade $ As % Of Trading Equity $ Buying Power Trade Multiplier I think of the settings in OV as using these 3 basic steps: (1) Buying Power determines the Trading Equity $ available. i.e. With Buying Power at 200% Trading Equity $ = 2X your Account Equity. (2) OV Strategy Allocation % yields a Trade $ amount based on the Original Account Equity. (Not Trading Equity $) (3) If you want your Trade $ amount to be based on the Trading Equity $, then you have to modify the Portfolio Trade Multiplier to adjust the underlying Strategy Allocation % to achieve what you want. The table below is on the attached spreadsheet and shows the various possibilities. Notice that any time the Buying Power and Trade Multiplier have similar values, the actual “Trade $ As A % Of Trading Equity $” is the same % as the Original Strategy Allocation %. (1) The 1st example below makes no Margin or Trade Multiplier changes: A) BP 100% x Account Equity of $100,000 = Trading Equity $ of $100,000 B) Trade Mult 100% x Strategy Alloc% of 20% = 20% of Account Equity = Trade $ of $20,000 Result: The initial Trade size of $20,000 = 20% of the $100,000 Trading Equity $ (2) In the 2nd example below both the BP and TM are halved: A) BP 50% x Account Equity of $100,000 = Trading Equity $ of $50,000 B) Trade Mult 50% x Strategy Alloc% of 20% = 10% of Account Equity = Trade $ of $10,000 Result: The initial Trade size of $10,000 = 20% of the $50,000 Trading Equity $ (3) Now, suppose we substitute a different value for the Trade Multiplier in the 2nd example: A) BP 50% x Account Equity of $100,000 = Trading Equity $ of $50,000 B) Trade Mult 200% x Strategy Alloc% of 20% = 40% of Account Equity = Trade $ of $40,000 Result: The initial Trade size of $40,000 = 80% of the $50,000 Trading Equity $ (4) This time, let’s substitute a different value for the Buying Power in the 2nd example: A) BP 200% x Account Equity of $100,000 = Trading Equity $ of $200,000 B) Trade Mult 50% x Strategy Alloc% of 20% = 10% of Account Equity = Trade $ of $10,000 Result: The initial Trade size of $10,000 = 5% of the $200,000 Trading Equity $ The ratios can get a bit interesting depending on what you want to do, so I’ve tried to make it easier with the attached “Portfolio_Settings_Calculations” spreadsheet. I’ll repeat the simple 1st example above, but now entering values in what I hope is a more “user friendly” manner. (Only the Red and Green cells allow entries) (1) In the Red Cells I enter: Account Equity of $100,000 Constructed Strategy Allocation % of 20% (2) In the Green Cells I enter: Desired Trading Equity $ of $100,000 Trade $ As % Of Trading Equity $ of 20% The spreadsheet then calculates that I should: (3) Set the Account Settings Buying Power To: 100% (4) Set The Portfolios Page Trade Multiplier To: 100% Also notice that it tells me that the Initial Trade $ will be $20,000 (20% of $100,000) Now I’ll repeat the 4th example above in my “user friendly” spreadsheet. (1) In the Red Cells I enter: Account Equity of $100,000 Constructed Strategy Allocation % of 20% (2) In the Green Cells I enter: Desired Trading Equity $ of $200,000 Trade $ As % Of Trading Equity $ of 5% The spreadsheet then calculates that I should: (3) Set the Account Settings Buying Power To: 200% (4) Set The Portfolios Page Trade Multiplier To: 50% Also notice that it tells me that the Initial Trade $ will be $10,000 (5% of $200,000) The true benefit of this comes if you want to experiment with different values. Let’s say you decide to trade my new Flexible By Design Portfolio and have a Margin Account of $55,000. You decide you’d like to see what would’ve happened in the past if you wanted to do 2 things to modify your trading; (A) Limit your use of Margin and start your trading at $65,000 (B) Limit the Strategies to an allocation of 15% of that $65,000 (vs my 20% Allocation) (1) In the Red Cells enter: Account Equity of $55,000 Constructed Strategy Allocation % of 20% (what I built it to use) (2) In the Green Cells enter: Desired Trading Equity $ of $65,000 Trade $ As % Of Trading Equity $ of 15% The spreadsheet then calculates that I should: (3) Set the Account Settings Buying Power To: 118.18% (4) Set The Portfolios Page Trade Multiplier To: 88.64% And my Initial Trade $ will be $9,750 (15% of $65,000) BTW: here’s the result when using the settings above over the past 5 years; The spreadsheet is protected so that you can only make entries in the 4 Red & Green cells, and it will pop up a notice in Yellow if your inputs will result in a Buying Power above 200%. As always, I hope the attached spreadsheet & these instructions help with your testing; either with my Portfolios or any of your own… and that all the colors in this post didn’t just confuse things (?) Mark [Edited by Mark Holstius on 8/3/2016 5:51 PM]  Attached file : 21_Spreadsheet_Ex_01.png (66KB - 819 downloads) Attached file : 22_Spreadsheet_Ex_02.png (63KB - 806 downloads) Attached file : 23_Spreadsheet_Ex_03.png (65KB - 791 downloads) Attached file : 24_Spreadsheet_Ex_04.png (63KB - 817 downloads) Attached file : 31_Spreadsheet_Ex01.png (105KB - 827 downloads) Attached file : 32_Spreadsheet_Ex02.png (105KB - 827 downloads) Attached file : 33_Spreadsheet_Ex03.png (106KB - 819 downloads) Attached file : 34_Spreadsheet_Results.png (232KB - 814 downloads) Attached file : Portfolio_Settings_Calculation_Spreadsheet.xlsx (183KB - 378 downloads) |
