Thank you for sharing your insight. Though, I will probably stay confused for a while. And I'm not complaining, it can't be any different when an aspiring quant with a lot to learn meets black box strategy. Having backtests and some documentation helps, but I still need to spend some time with Zorro before I can even properly formulate questions to ask. One promising thing about all this is that jcl is such a nice guy, so I'm confident it's worth investing my time in Zorro.
Yes jcl is unbelievably helpful.
One thing, I've seen elsewhere on the forum that max risk per trade could be approximated by risk * margin formula. But, that confuses me very much, and here's why: say you invest $5000 capital (should be enough for both Z1 & Z2) and run the strategy with default 50/10. That would mean you risk up to $500 or 10% of the capital per trade, right? But, what if you run the same default parameters on the demo account, which btw can be opened only with $50000 of starting capital. Now default parameters and max risk per trade calculated by that formula mean something very different. You're now risking only 1% of the capital. By that measure, earning 1.6% after a month or so, as I've managed to do, is quite nice. But I wonder how much would I have earned if I matched the risk of the $5k account? But, alas, I can't move the slider to that position. It stops at 50, so max risk per trade becomes $2500 which is only 5% of the capital. And yes, I started moving both sliders to the right, after I learned about the formula, but I forgot to do it so many times, that many trades ended open with default 50/10. Argh.. So, as a conclusion either the formula is wrong, or the sliders are not adequate or I got something wrong. Currently, I'm heavily betting on the third option.
OK - I have no insight into the black box either, so I'm only surmising from my reading of the manual and the posts on here. Black boxes make me uncomfortable, but not as much as the feeling that all the old indicators I've been using unsuccessfully are unproven rubbish and I need to get smart on a whole load of maths on signal processing and statistics.
My understanding of the strategies underlying Z1 & Z2 are that %equity is only important in the context of avoiding margin calls, i.e. minimizing risk, protecting capital at all costs, minimizing drawdowns etc.
The backtesting module is designed around maximising return from the minimum capital expended. Therefore, the systems try to analyse and "learn" where to allocate precious margin to the assets and algos that give the most robust return, i.e. steady returns with minmal drawdowns. Jcl has proven countless times how reinvesting %equity leads inevitably to blowing out an account, so I'm no longer interested in compounding %s of my equity to infinity. I'm now happy to try to eak out nice steady returns with static margin at risk.
This is where the risk margin comes in, they are sliders allowing you to more or less set the max drawdown you can tolerate while operating the strategies over a long period. The max drawdown plus a calcualtion of how much margin you need to run up 30 open positions fall out of the margin per trade you are setting here.
I am happy to run this at 50 10 while testing. Backtesting at these max margin levels per trade, means I would need € 2,658.00 to deliver a return approximating € 319.00 per month over time. I would be happy to run this live at those levels and am uninterested in the demo account equity.
I am however extremely interested to see if it performs as per the backtests and whether the strategies can somewhat replicate the backtested performance. What the real returns, profit factors, sharpe ratios, ulcer index, max drawdown are in demo trading.
If you are interested in finding out a different question, how would the z strategies perform with 50,000, then set the sliders to the right, but remember as margin at risk increases, so will the max drawdown.
The reason the sliders stop is that jcl & co, not unfairly, would like you to buy the zorro s product for more serious trading.
Also my understanding is that the sliders are set and forget unless you wish to reduce them. Increasing them is reinvesting profit, and not advised. Remember they are overall margin at risk per trade settings not risk per individual trades. Even if the sliders allowed a 50,000 per trade margin, the robot would not use this on each trade as it uses a optimised margin per algo asset model.
I hope for 2 things:
1) I actually understand correctly what I've been reading - otherwise jcl might dive in and set us all straight
2) I've made things clearer rather than muddier.
