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AFL of the week: Anti-Martingale Trading system
2016-03-08 00:03:33 admin

On our readers request, we will explore dynamic position sizing using Amibroker this week. Also we shall go over Anti-Martingale
Trading system in the same context. In Trading system terminology, dynamic position sizing is referred to a strategy where position
size may vary with each trade or during the course of a particular trade depending on some pre-defined rules. For Ex: Suppose a trader
implements a Trading system which performs comparatively bad during Quarter 4 every year, however its performance during other
Quarters is quite impressive. In this case, the Trading system can be modified in such a way that Position size is decreased
automatically during Quarter 4 and its increased during Quarter 1, 2 and 3. This would overall increase the performance of the system.
Its imperative for your trading success that you should be very careful in selecting the position size and hence its very important to give
utmost attention to this topic.

Anti-Martingale system using Dynamic Position Sizing

Martingale or Anti-Martingale systems are widely popular across casinos across the globe. In Martingale system, the gambler doubles
up his bet size on every loss so that he covers up all his loss through a single win. While in Anti-Martingale system, the gambler
doubles up his bet size on every profit. The same concepts can be applied in Trading systems too. In Anti Martingale trading system,
the trader increases his position size gradually if the trade goes in his favour, while the position size is decreased if the trade goes
against him. The basic assumption behind this strategy is that profits from your winning trades is always higher than the losses from
your losing trades. This strategy is particularly very helpful in trending markets. Its a statistically proven fact that Anti-Martingale strategy
performs better that Martingale strategy over a long term.

Amibroker has dynamic position sizing capabilities which would enable us to devise and backtest Anti Martingale strategy. In Amibroker
terminology, increasing your position size is termed as Scaling-In, while decreasing your position size is termed as Scaling-Out. Two
special constants: sigScaleIn / sigScaleOut provide means to tell the backtester when you want to scale-in/out

In order to change the position size you have to:

Assign sigScaleIn to BUY/SHORT variable if you want to scale-in (increase size of) LONG/SHORT position.
Assign sigScaleOut to BUY/SHORT variable if you want to scale-out (decrease size of) LONG/SHORT position.

Read our article on AFL tutorial here.

AFL Overview

Paramter Value
Preferred Timeframe No Constraint

Indicators Used MACD, Signal

Positions Long only

Buy Condition MACD crosses above Signal line

Sell Condition MACD crosses below Signal line

Stop Loss No fixed Stoploss

Targets No fixed target

Initial Position size (150 fixed)

Position Size Increase position size by 150 with every 100 points gain since Buy.

Decrease position size by 75 with every 50 points loss since Buy.

Initial Equity 100000

Brokerage 50 per order

Margin 10%

AFL Code

//------------------------------------------------------
//
// Formula Name: Anti-Martingale Trading system
// Author/Uploader: Trading Tuitions
// E-mail: support@tradingtuitions.com
// Website: www.tradingtuitions.com
//------------------------------------------------------

_SECTION_BEGIN("Anti Martingale Trading Syatem");

SetTradeDelays( 1, 1, 1, 1 );
SetOption( "InitialEquity", 100000);
SetOption("FuturesMode" ,True);
SetOption("MinShares",1);
SetOption("CommissionMode",2);
SetOption("CommissionAmount",50);
SetOption("AccountMargin",10);
SetOption("RefreshWhenCompleted",True);
SetOption( "AllowPositionShrinking", True );
BuyPrice=Open;
SellPrice=Open;
ShortPrice=Open;
CoverPrice=Open;

//Specify ScaleIn and ScaleOut parameters

ScaleInPoints=100;
ScaleOutPoints=50;
ScaleInSize=150;
ScaleOutSize=75;

//Buy and Sell Condition

Buy = Cross( MACD(), Signal() );
Sell = Cross( Signal(), MACD() );

BuyPrice=ValueWhen(Buy,C);

for( i = 1; i < BarCount; i++ ) { Profit[i]=Close[i]-BuyPrice[i]>=ScaleInPoints;

Loss[i]=Close[i]-BuyPrice[i]<=-ScaleOutPoints;
if(Profit[i]==1)
ScaleInPoints=(Close[i]-BuyPrice[i])+100;
if(Loss[i]==1)
ScaleOutPoints=-(Close[i]-BuyPrice[i])+50;
if(Sell[i])
{
ScaleInPoints=100;
ScaleOutPoints=50;
}
}

InTrade = Flip( Buy, Sell );

DoScaleIn = InTrade AND Profit;

DoScaleOut= InTrade AND Loss;

Buy = Buy + sigScaleIn * DoScaleIn + sigScaleOut * DoScaleOut;

PositionSize = IIf( DoScaleOut,ScaleOutSize, ScaleInSize);

Plot( Close, "Price", colorWhite, styleCandle );

SetPositionSize(PositionSize,spsShares);

PlotShapes(IIf(Cross( MACD(), Signal() ), shapeSquare, shapeNone),colorGreen, 0, L, Offset=-40);

PlotShapes(IIf(Cross( MACD(), Signal() ), shapeSquare, shapeNone),colorLime, 0,L, Offset=-50);
PlotShapes(IIf(Cross( MACD(), Signal() ), shapeUpArrow, shapeNone),colorWhite, 0,L, Offset=-45);
PlotShapes(IIf(Cross( Signal(), MACD() ), shapeSquare, shapeNone),colorRed, 0, H, Offset=40);
PlotShapes(IIf(Cross( Signal(), MACD() ), shapeSquare, shapeNone),colorOrange, 0,H, Offset=50);
PlotShapes(IIf(Cross( Signal(), MACD() ), shapeDownArrow, shapeNone),colorWhite, 0,H, Offset=-45);
PlotShapes(IIf(DoScaleIn, shapeSmallUpTriangle, shapeNone),colorBlue, 0, L, Offset=-45);
PlotShapes(IIf(DoScaleOut, shapeSmallDownTriangle, shapeNone),colorBlue, 0, H, Offset=-45);
_SECTION_END();

AFL Screenshot

The up and down arrows represent Buy and Sell signals respectively. Blue up triangle represents Scale-In, while Blue down triangle
represents Scale-Out.
See how the position is gradually increased for profitable trade:

See how the position size is gradually decreased for loss making trade:

Backtest Report

Below is the backtest report for this strategy. Please note that backtester treats trade that you scale-in/out as SINGLE trade (i.e. will
show single row in trade list). The only difference versus plain trade is that it will calculate average entry price based on all partial
entries and average exit price based on all partial exits and will show average prices in entry/exit price field. The commission is of
course applied correctly to each (partial) entry/exit depending on partial buy/sell size. If you want to see details about scaling you have
to run backtest in DETAIL LOG mode as only then you will see how scaling-in /out works and how average prices are calculated.

Value
 Paramter NSE Nifty
Initial Capital 100000
Final Capital 1752936.03
Backtest Period 11-Apr-2000 to 23-Feb-2016
Timeframe Daily
Net Profit % 1652.94%
Annual Return % 19.39%
Number of Trades 146
Winning Trade % 43.56%
Average holding Period 14.89 periods
Max consecutive losses 8
Max system % drawdown -65.87%
Max Trade % drawdown -85.83%

Download the detailed backtest report here.

Please note that you can expect even better results if you allow compounding of your returns.

Equity Curve

Additional Amibroker settings for backtesting

Goto Symbol>Information, and specify the lot size and margin requirement. The below screenshot shows lot size of 75 and margin
requirement of 10% for NSE Nifty:
Disclaimer:

All the AFLs posted in this section are for learning purpose. Trading Tuitions does not necessarily own these AFLs and we dont have
any intellectual property rights on them. We might copy useful AFLs from public forums and post it in this section in a presentable
format. The intent is not to copy anybodys work but to share knowledge. If you find any misleading or non-reproducible content then
please inform us at support@tradingtuitions.com

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