Extend Ninja Trader Risk Manager for stocks and other instruments

mdoepp001

The Ninja Trader risk manager has been designed for forex and futures. Most features also work fine for other instruments like trading stocks. An important current limitation is that the draw down percentage is calculated by dividing the draw down amount with the current cash balance (balance field on the dash board). However when trading instruments like stocks the cash balance is diminished when entering a trade. The calculation of the draw down percentage for these situations can be easily fixed by dividing the draw down amount by the original balance when starting the software (which is stored by the risk manager). The same goes for calculating the equity gain percentage on the dash board. This could be an option for traders who also trade other instruments than forex and futures. E.g. on the settings Tab split the Use Ticks option: Use Ticks Futures (current functionality), Use Ticks Other (alternative calculation of the draw down percentage and the equity change percentage). Or alternatively provide another setting. Calculate draw down percentage of original balance.

Mike

Hi, can you provide a more detailed explanation of the new features so we can review it, I am not too familiar with Ninjatrader and need your help?

mdoepp001

Happy to provide more information. I will use an example for trading stocks with NinjaTrader.

Initial account balance 50.000 USD
I buy 1000 stocks NIO at 24 USD, I sell them at 23,80 USD (I have a stop loss at 23,80 and risk 200 USD, 20 ticks )
I buy 400 stocks AMD at 124 USD, I sell them at 126 USD (I have a stop loss at 123,50 and risk 200 USD, 50 ticks)

1) After my buy order for NIO is filled my cash balance is lowered to 26.000 (50.000 minus the purchase price for 1000 NIO stocks). This is the balance field on the dash board (cash value at NT accounts Tab). My equity on the dash board remains 50.000 (net liquidation on the NT accounts Tab)

2) The price of AMD decreases to 23,90 USD. The balance field on the dash board remains 26.000 . My equity on the dash board decreases to 49.900

3) The price of AMD decreases to 23,80 USD and I sell the position. The balance field on the dash board decreases to 48.800 and the equity on the dash board decreases to 48.800

4) After my buy order for AMD is filled my cash balance is lowered to 400 (50.000 minus the purchase price for 400 AMD stocks). This is the balance field on the dash board (cash value at NT accounts Tab). My equity on the dash board remains 50.000 (net liquidation on the NT accounts Tab)

5) The price of AMD increases to 125 USD. The balance field on the dash board remains 400. My equity on the dash board increases to 50.400

6) The price of AMD increases to 126 UD and I sell the position. The balance field on the dash board increases to 50.800 and the equity on the dash board increases to 50.800

So the calculation of the cash balance and the equity/account balance as retrieved from Ninja Trader is correct. However as the Risk Manager assumes (as is the case for Forex and Futures) that the cash balance only changes after the order is closed (and not when filled and during the trade as with stocks) some features do not work well when trading other instruments. See in the next posts the calculation of drawn down percentage and equity percentage.

mdoepp001

See example above. After the price of NIO drops to 23,90 I have a draw down amount of 100 USD. This is calculated correctly within the Risk Manager. However the calculation of the draw down percentage is incorrect. The correct drawn down percentage is 0,2% (100 USD from the initial account balance of 50,000 USD). The risk manager presents 0,38% (100 USD from the current cash balance of 26.000).

So the requested change is to calculate the draw down percentage by using the initial account balance. This is cash balance amount when starting the Risk Manager before the trading session . So for the example it is the 50.000 USD when I start the session. When I have I gained 2000 USD for the day and I start a new session the next day it would be 52.000 USD. (Note: when shorting stocks the cash balance will increase for the amount sold, so using the cash balance during the session is not an option).

The request is to have an option for how to calculate the drawn down percentage (on the settings Tab ).

Calculate drawn down pecentage using

Current cash balance (when only trading forex and futures) (note: this is current calculation)
Cash balance when starting the session (when also trading other instruments)
Fixed balance of X (when carrying other instruments over multiple sessions)

mdoepp001

@mdoepp001#1756 Read NIO for AMD at point 2 ) and 3) . Cannot change it anymore directly.

mdoepp001

See example above. After the price of AMD increases to 125 I have an open gain of 400 USD. This is calculated correctly within the Risk Manager. However the calculation of the equity percentage (top right hand corner of the Dash board ) is incorrect. The correct percentage is 0,8% (400 USD from the initial account balance of 50,000 USD). The risk manager presents 12500 % (50.400-400 / 400 ) , as it uses the current cash balance of 400 instead of the 50.000 USD ).

So the requested change is to calculate the equity percentage by using the initial account balance. This is cash balance amount when starting the Risk Manager before the trading session . The same logic can be used for the cash balance as described in the previoous post for the drawn down percentage.

mdoepp001

Finally the usability of the Trade Activity Alarm: When any position is X ticks down could be improved for trading multiple instruments like stocks by replacing Ticks down by Amount down or % down. This because this risk parameter varies by instrument. In the given example the Risk for NIO is 20 Ticks and for AMD 50 Ticks. The option would be usable in this example when the amount down for the position could be entered instead (200 USD). Or a % of the intial cash balance (provided that it is calculated as requested for the drawn down percentage). In this example the % would be 0,4% (200 USD from 50.000 USD).

Same goes for the Trade Activity Alarm when any position is X Ticks up.