The market is a controlled dynamic system. - page 98
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Equity is primary here. And not only here. The balance is a consequence of closing a position (we do not take the initial deposit into account as we need profit, not what was taken out of the family and is in fact an expense item). The position is opened first and if the position is profitable, funds are accumulated, but the balance (as a fixed profit/loss) does not reflect anything yet. The balance will show a value only when the profit/loss is fixed, i.e. when the current equity is fixed. If a part of a profitable position is closed and the market moves in the required direction, the equity will be higher than the balance - the profit part has been fixed on the balance. If the remaining part of the position goes down, well the market turns around, the remaining unclosed part of the position will go down and equity will be lower than the balance. If the position is held until the drawdown reaches the MarginCall level, in the hope of waiting out the loss, the position is likely to fail. Although we had something on the balance after closing part of the position, but the drawdown of the current funds led to the closing of the StopOut. Clearly, funds are paramount. The balance does not play any role here. You can forget about it and consider only the funds as real money. And funds are the real position in the account.
Quite right, the trading dynamics are only reflected by the funds reacting to each tick, while the balance is held constant, as if nothing is happening to the trading results. This can be seen simply by observing the numbers at the bottom of the terminal as the price changes. Why do we need information which does not react to the market situation? Balance reflects results, i.e. trading history, but not its current state and dynamics.
Means (S) = Balance Sheet + Unfixed Profit (S);
Means(S) = Balance Sheet - Loss Unfixed (S);
B = C(C) - P(C) when the total position is positive, i.e. B < C;
B = C(C) - [- P(C)] = C(C) + U(C) when the total position is negative, i.e., B > C.
Detrimental and catastrophic nature of the balance orientation is obvious from the last equation, because, oddly enough, the balance shows the sum of means and losses at a negative total position! The loss is added to the funds and a virtual deposit in the form of a huge "balance" is created
Equity and Balance should be swapped. ))
Absolutely not.
And put "change in equity" on virtual level 3. (all that is left is to attach a name).
Then continue by analogy: level #4, level #5....
;)))
Absolutely not.
And put "change in equity" on virtual level 3. (all that is left is to attach a name).
Then continue by analogy: level #4, level #5....
;)))
If you do not change, then the artist is in the virtual world (level 4). :)
By the way, it would be interesting to see your two trading curves (balance and equity). Is there such a possibility?
Quite right, the trading dynamics are only reflected by the funds reacting to each tick, while the balance is held constant, as if nothing is happening to the trading results. This can be seen simply by observing the numbers at the bottom of the terminal as the price changes. Why do we need information which does not react to the market situation? Balance reflects results, i.e. trading history, but not its current state and dynamics.
Means(C) = Balance Sheet + Unfixed Profit(C);
Funds(C) = Balance Sheet - Unfixed Loss(C);
B = C(Ts) - P(Ts) when the total position is positive. i.e. B < C;
B = C(Ts) - [- P(Ts)] = C(Ts) + U(Ts) with negative total position, i.e. B > C.
The perniciousness and disastrousness of the balance orientation is obvious from the last equation, because, oddly enough, the balance represents the sum of funds and losses when the total position is negative! Losses are added to funds and a virtual deposit is created in the form of a huge "balance sheet"
A mistake has been made here.
A loss is a negative Profit. That's why there is no point in adding an extra variable.
Loss = - Profit
Why refer equities to the virtual world? Equity is a real reality because it is real money that can be withdrawn at any time by closing all positions, while the balance is, indeed, predominantly in the virtual world.
Here you contradict yourself.
The movement from Equity to Cash inevitably passes the Balance stage.
It's something like that.
Oh, well, that's OK then. We compare balance and equity by closing all positions and only then look at what we put in the cache. :)
Cache can also be divided into several levels. Also, from virtual to real. ))
A mistake has been made here.
A loss is a negative Profit. Therefore, there is no point in introducing an extra variable.
Loss = - Profit
That's how it was quoted, but if you want, you can do it that way, but it doesn't change the point:
B = C(C) - [- P(C)] = C(C) - [- P(C)] = C(C) + P(C) with a negative total position, i.e. B > C.
As you can see, the balance misrepresents the true position - misleading.
Why, so zealously, "pick on" this "balance"? What do you dislike about "means"? And, in the particular case, balance = funds when all positions are closed. Cash (withdrawal) is possible even with a negative balance, as long as there are free funds in the form of unfixed profits. Now do you understand the insignificance of the balance?
This is where you contradict yourself.
The move from Equity to Cash inevitably goes through the Balance stage.
Oh, well, that's OK then. We compare balance and equity by closing all positions and only then look at what we put in the cache. :)
Cache, too, can be divided into several levels. Also, from virtual to real. ))