Well in the game of trading, the market usually rewards you for the risk you are willing to take, as long as you are not exploiting an arbitrage position. I am ready to sit on a 60 to 80% drawdown it must come to it as long as the trades in the live session fall within statistical expectation. I believe the capital required is calculated as the maximum drawdown plus the maximum margin required in the test period.
Makes perfect sense to me to be honest. Its how much capital you will need to to hopefully weather the storm, but if its a hurricane then you can possible lose everything. That is why its usually a good idea to go in with atleast 1.5 times the capital required for a risk loving person like myself and maybe a 5 times capital required for a risk averse person like yourself.
But remember your returns are based on the risk you are willing to take.

That should fix it.

:-). I did a retest and the needed capital is okay. :-)

OK, you have put it all nicely and I can agree with most of what you wrote. You are also right about capital required calculation.

But, while reading your post, it also crossed my mind that not only we might have quite different risk tolerance, but also that we're maybe missing an important variable here. A variable that will shed new light on the whole issue. And that is how much of our savings / net worth are we actually commiting to trade forex? Allow me to explain with an example...

Let's say that both of us have $20000 of life savings and that both of us are attempting to get better return on that money, instead of leaving it in the bank and earning steady 2% per year. Somehow we both came to the conclusion that a) forex market is interesting because of it's liquidity and b) that system trading is the way. So far so good.

Now let's see where we might diverge slightly in approach and thus create an illusion that we have different risk tolerance, when there might be none.

You might say, this forex market is dangerous, I'm afraid of it, so I'll commit only $4000 of my life savings to trade forex. You leave the rest in the bank. On the other hand, because you now stand to lose max 20% of everything, in the worst case, you can actually be very courageous and thus you're willing to see even 60-80% drawdowns, because, hey, you can never lose more than 20%. Right?

Me, on the other hand, I might look conservative, but actually my approach is a bit different, which leads to a wrong conclusion. From the begining, and currently just playing with demo account, I'm pretending that I'm already trading with all of my life savings. So I play from the beginning like I have invested all of $20000 I have.

Now, to match our risk tolerance, we would need to include all those parameters in the calculation. At the time that your $4000 account is say 60% underwater, that is -$2400, mine should be 12% underwater (also -$2400) if we're at the same risk level. If I'm at -15%, that actually means that you're more conservative than me. Even if the numbers tell quite the different story.

So is Sundance risking $5k of $10k of his life savings, and is thus wildly adventurous, or using $5k of $500k, which his grandma left him when she died (and is thus chicken), we really don't know. No hard feelings Sundance!

These money management calculations can really be a bitch and deserves it's own topic (or another one). I'll soon open one, because I have one more thing I'd like to point out.

Acid you call me chicken? :-)
I know that I risk to much but I see so less trades I raised the values.
When I loose the 5000€ my wife will kill me but nothing more or less. I have my fonds running. Those 5000 bucks are money I can 'play' with...

Ha ha ha, I see you!





Oops. Still, read my topic about undercapitalization. I'd like to see you around for much longer.

I already read it. I'am not that certain if I really should lower the margin more. I think then Z12 won't take any more trades...

@Acidburn - I do not know anyone who has made money with robot trading. I have read Market Wizards and there are people there who have, apparently. Larry Williams would use software and mechanical rules but still placed his trades manually after a little discretionary input. And I have read about those HFT computers sitting beside the exchanges. But robot trading like us, I know of no one, let alone someone who's real results were better than backtested. No one on this forum has come forward and said 'yes, I am making money with what I have coded or with the Zs, that is reliable.'

Also, it is clearly stated in the manual, somewhere, that to have a 'steady income' you need in the order of ten algos across ten symbols, give or take. With Z3, Z5, Z12 I would expect I have this. But my three months of trading and the demo's six months of trading are, in my opinion, failing with this objective. The flat period is clearly longer than the backtested one (some 20 weeks depending on the version of Zorro.) The exception is Z5 which some of us feel uncomfortable trading (I know discomfort is good, but grid trading?)

Also, I am like that second guy. I have my life savings. I have an overall passive income I would like to get from it (to fit my Asia living plan) and I am willing to take a higher risk on a small proportion of it so that the overall return meets my objective. I agree that it fits into a bigger picture and each individual must frame it based on their objectives, current situation and risk appetite.

Finally, I can give the Zs six more months, but not with real money. And if someone tells me that the results are within statistical boundaries, but they are not willing to show me the actual numbers, then I can't believe them, at least not with real money.

I usually give things a little more slack than they deserve, or give them too much the 'benefit of the doubt.' But this is stretching my patience.

Well I have asked for myfxbook verified stats for the accounts and it has been overlooked countless times... Verification of the claim comes down to us

@Liftoff - There is one tendency that is almost universal. Once you become a successful trader, you leave the noobs community and don't feel a need to publish your results. Then you become a myth, like so-and-so's brother-in-law trades for a living. Even the one's who do stay public, e.g. through education, don't publish their results. So I won't be surprised if the Zorro team keep their official and personal results to themselves. With other educators, I have even asked for a results file without the lot size and account balance. Just the date/time, entry, exit (and pleaded for initial stop for risk calcs) but they don't share. Such attachment, such ownership and such pride. It almost contradicts the equanimous state of being required to handle trading's ups and down.