When you set the Capital variable to a value x, and then get "Required Capital" > x, increasing Capital won't help of course because the required capital rises linearly with it. The lower limit is the required capital _without reinvestment_. The required capital is calculated from the maximum drawdown, so your capital must be higher when that happens, but not necessarily at the begin. Otherwise limit the reinvestment factor so that you won't get negative equity.
OK, when I don't reinvest it is clear, I have to initially invest the capital required to avoid negative equity in case of drawdowns.
The thing is when reinvesting...How can I know the initial capital of the strategy in order to be on the safe side? With your explanation Jcl and rereading the definition of capital required:
Required initial capital for trading the strategy. For strategies that reinvest profits (Capital variable nonzero), the displayed value is the minimum initial capital for avoiding a margin call in the test period. Otherwise it's the sum of normalized drawdown and maximum margin. This amount would be required when the strategy is entered at the worst possible moment of the simulation, i.e. directly at the balance peak preceding the largest drawdown.
I guess in my example that if I start the reinvesting strategy with 1000 I have to maintain 3119 in the account for re margin in case of being near a margin call. Is that correct?
Could you share how is it the capital required calculated when reinvesting? Maybe that clarifies more my doubt.
Edit: I am using for setting the margin the formula from the workshop 6: Margin = OptimalF * Capital * sqrt(1 + max(0,WinTotal-LossTotal)/Capital);
