Portfolio Constraints

Constraints are used to subject a portfolio to requirements that exist in real trading situations. If a constraint is violated when a trade is to be placed, the trade will be cancelled and will not appear on the list of trades.

If more than one constraint is set for a portfolio, a trade will not be placed if only one out of all constraints is violated.

Settings Constraints

The following steps are used to set portfolio constraints:

  1. Click the Manage Portfolios icon in the Shortcut bar.
  2. Click the Portfolio Settings button. The Portfolio Settings dialog is displayed.
  3. Select the Constraints tab.
  4. Select the desired constraint from the Constraint Method drop-down list.
  5. Enter a decimal number in the Constraint box for the constraint ratio.
  6. Click the Apply Constraint button. The constraint is added to Constraints to Apply to Portfolio list with the current constraint value shown in the Constraint Ratio column.
  7. Enter as many additional constraints as desired.
  8. Click OK when finished.

Constraint Logic

Multiple constraints follow OR logic. If any single constraint is met in a group of constraints, the trade will not be placed.

Constraint Definitions

Margin to Equity - Calculated for each entry at the moment of placing the trade. Both Margin and Equity are taken at the moment prior to the trade. If the new trade would lead to the margin to equity ratio that exceeds the ratio set in this constraint, the trade will not be placed.

Margin to Fixed Capital - Calculated for each entry at the moment of placing the trade. If the new trade would lead to the margin to equity ratio that exceeds the ratio set in this constraint the trade will not be placed.

Net Open Position to Equity - Calculated for each entry at the moment of placing the trade. Both Net Open Position and Equity are taken at the moment prior to the trade. If the new trade would lead to the Net Open Position to Equity ratio (a positive value) that exceeds the ratio set in this constraint, the trade will not be placed.

Net Open Position to Fixed Capital - Calculated for each entry at the moment of placing the trade. Both Net Open Position and Equity are taken at the moment prior to the trade. If the new trade would lead to the Net Open Position to Fixed Capital ratio (a positive value) that exceeds the ratio set in this constraint, the trade will not be placed.

Long Position to Equity - Calculated for each entry at the moment of placing the trade. Both Long Position and Equity are taken at the moment prior to the trade. If the new trade would lead to the Long Position to Equity ratio that exceeds the ratio set in this constraint, the trade will not be placed.

Long Position to Fixed Capital - Calculated for each entry at the moment of placing the trade. If the new trade would lead to the Long Position to Fixed Capital ratio that exceeds the ratio set in this constraint, the trade will not be placed.

Short Position to Equity - Calculated for each entry at the moment of placing the trade. Both Short Position and Equity are taken at the moment prior to the trade. If the new trade would lead to the Short Position to Equity ratio (a positive value) that exceeds the ratio set in this constraint, the trade will not be placed.

Short Position to Fixed Capital - Calculated for each entry at the moment of placing the trade. If the new trade would lead to the Short Position to Fixed Capital ratio (a positive value) that exceeds the ratio set in this constraint, the trade will not be placed.

Maximum Number of Positions - Calculated prior to each entry at the moment of placing the trade. If the new trade would lead to the Number of Positions that exceeds the Maximum set in this constraint the trade will not be placed.

Gross Open Position to Equity - Calculated for each entry at the moment of placing the trade. Both Gross Open Position and Equity are taken at the moment prior to the trade. If the new trade would lead to the Gross Open Position to Equity ratio that exceeds the ratio set in this constraint, the trade will not be placed.

Gross Open Position to Fixed Capital - Calculated for each entry at the moment of placing the trade. Both Gross Open Position and Equity are taken at the moment prior to the trade. If the new trade would lead to the Gross Open Position to Fixed Capital ratio that exceeds the ratio set in this constraint, the trade will not be placed.

Maximum Number of Positions per Symbol - Calculated prior to each entry at the moment of placing the trade. If the new trade would lead to the Number of Positions per any symbol that exceeds the Maximum set in this constraint the trade will not be placed.

Net Open Position = Sum of all Long Positions – Sum of Absolute Value of all Short Positions.

Gross Open Position = Sum of all Long Positions + Sum of Absolute Value of all Short Positions.