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I notice something I cannot account for in the backtester using
margin:
If I set the backtester for 30 percent margins (the current
requirement in Tokyo), and run one of my systems deliberately putting
a DD period at the beginning of the system, I run out of enough
equity to take *all* the trades during the DD. Okay, I understand
that.
But . . . if I change the margin requirement to 100 (no margin) and
up the initial equity to X times 3 (300 percent of what I was using
with a margin setting of 30), I now have enough equity to take *all*
trades.
What am I foggy about? It seems to me that upping the initial equity
by a factor of 3 is equivalent to a margin setting of 33 percent,
which is a higher requirement than I was actually using, 30 percent.
It therefor seems to me that I should have MORE buying power with
initial equity set at 100 percent and margin requirement at 30 than I
would with initial equity set at 300 percent and no margin. But
apparently the backtester does not see it that way.
I am pretty sure of my math here, so I'm wondering what the case
might be. Position size is a flat amount per issue, all issues the
same. I *know* that I have more buying power with (for example) 1
million dollars at 30 percent margin (BP would be about 3.33 million)
than I do with 3 million cash and no margin. That math doesn't lie.
But the backtester says a DD that *doesn't* run out of BP in the cash
account during an initial DD *does* run out (to the extent that not
all trades are taken) in the margin account -- all other settings
*exactly* identical.
Help?
Yuki
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