Fellow Bear Bull Traders,
I would like to share with you the Equity Simulator. Another possible name for it could be Expectations Manager.
What the tool does:
The tool calculates the likely Equity curve and distribution of daily R given the probability of R outcomes in every trade. It also compares the Equity curve when using a Fixed amount R vs using R as a % of Equity.
Motivation:
As part of my Trading plan, I've set rules for increasing and decreasing position size based on my trading results, as well as moving from Live to Sim and vice versa. But I was feeling that these rules were quite arbitrary - I was wondering how many Red/Green days a week/month I should reasonably expect in the long run, and what kind of profitability I would actually need to meet my goals. Learning how to execute each trade properly is paramount but I felt this would add some perspective and peace ("do I really have to have red days, given my win rate?":)
Alternatives:
EdgeWonk analyzes individual trades and seeks for potential improvement in entries, exits, and trade management in general. (thanks @KyleK29 for the suggestion) In contrast, this Simulator can't be used for tweaking individual strategies - it focuses more on the bigger picture and your average trading results. It could be however used to compare your results using two styles of trade management - e.g.
Style 1 : 60% chance of -1R, 40% chance of 2R vs
Style 2: 80% chance of -1R, 20% chance of 4R
Further comments can be found in individual cells and on the second sheet. Please let me know any suggestions or questions.
Link to the Excel file: https://drive.google.com/file/d/1SUEfrZskJOWpwASR7sUvB2LnOrkxgF2d/view?usp=sharing
Have a nice day and don't forget to hold the line!
JanJ
