Hi JCL and all,

I have a question about the strategy test results. Does the tester start with a certain balance and then add winning and subtract losing trades? If not then what is the % return figure based on?

Also could you please go through how to set up micro lot trading on fxcm and how to set the script to risk a certain % on each trade? I would like the default to be 0.01 so that if you want to risk 1% over 200 pips and there is not sufficient balance in there to risk even 0.01 it still does so.

Thanks

The tester does not start with a balance - that would not make any sense, as the performance test should obviously not depend on some arbitrary start balance. The performance figures are described here:

http://zorro-trader.com/manual/en/performance.htm

For a micro lot account, either contact FXCM and ask them to convert your current real account to micro lots, or open a new account on http://www.forexmicrolot.com/.

Micro lot accounts are recommended - you can trade with smaller capital and get slightly higher profits, as the smaller lot size allows more precise money management.

Ok, so how would I get a script to trade in micro lots as a percentage of my balance?

I can't find any explanation of how the annual return % is arrived at on that page.

To me it makes perfect sense to start with an "arbitrary start balance" because then you can work out your profit and loss if you took trades risking a % of your account on each trade.

The start balance has no effect on the strategy performance, otherwise wealthy people would always develop better strategies than poor people . Reinvesting a percentage of your profit has certainly an effect. Look in the manual under "Margin" how to set the trade margin, and check out "Money Management" and "Reinvesting Profits" on the following page

http://zorro-trader.com/manual/en/tutorial_kelly.htm

for learning the consequences when you do that.

That doesn't make sense. Of course the start balance has no effect on the results of the system itself but how can you calculate an effective % return figure unless you know how much you started with?

Poor people and rich people can all start with the same notional "arbitrary balance" and come up with the same system.

I have looked at those pages and they don't make sense either. You can't adjust your lot size by using margin unless you know your leverage.

If I have a balance of £1000 and I want to risk 2% per trade then I want to risk £20. If I am using a stop loss of 100 pips then I want to trade at £0.20p per pip. The cost per pip on eurusd is usually around 0.065p per pip so I can trade with 3 micro lots. How does manipulating the margin change this unless you know the leverage?

I know I am still thinking in a mt4 mindset but I would appreciate help with this. Thanks.

What I'm driving at is whether there is an easy way to calculate something like the following...

Lot size = (balance/100)*riskpercent)/stoppips/tickvalue

which is what I have used on mt4 very simply and easily to calculate the position size I need to use in order to risk a set % of my account on each trade of a set stop loss size.

Ok. The variables have different names in Zorro, so a formula equivalent to yours would look like this:

Lots = Balance/100*riskpercent/(Stop/PIP)/PIPCost;

But the normal method is to set a trade investment by Margin, and a maximum trade risk by Risk, like this:

Margin = Balance/100*riskpercent;
Risk = Balance/100*riskpercent;

The lot amount is then automatically reduced to not exceed the given risk. Finally, when you want to reinvest your balance, definitely check out the Money Management tutorial on the link I posted above. Money management is not trivial and a simple method as in your formula will unnecessarily reduce your profit and increase your risk. The percentage to reinvest is not up to you, it depends on the strategy and must be calculated from the equity curve. The same goes for the initial capital.

If you do not understand something with the tutorial or manual, just let me know what it is. I'm the tutorial guy, so it's my job to help with those questions.

Yes, I sort of understand it. I'm used to just putting 1% on every trade and continuing to do so. As I win I risk more $ per trade and as I lose I risk less. I've never particularly considered the consequences on the equity curve.

So is it better to just risk a certain $ amount per trade and after a year if you have made money increase that $ risk amount a little?

Also how do I code a script to trade micro lots? Do I just change the margin and risk level and it will do it automatically at FXCM's end?