Drawdown calculator for TopBot Anomaly LITE

Trade with biggest loss or stop-loss if activated (in %) :

% of capital invested per position entry :

Lever used :

Deviation in % of the setting between the two input levels :

Maximum total capital loss for 1 position used (in %) :

Maximum total capital loss for 2 positions used (in %) :

Calculator explanations

The purpose of the calculator is to find out how much to invest and how much leverage to use in order to limit the maximum loss to a certain level (1 to 2 % loss per trade maximum recommended).

If you're using two levels of positional inputs, enter the difference between your two positions.

Note that the calculator is absolute. It assumes that both position entries are for the same amount. In the case of a position entry "in % of available capital", the result for "2 positions used" will be slightly lower than the result above.

A complete and precise calculator is integrated into the Pro version of the strategy directly on TradingView.

50% of loss means 100% to reassemble!

In trading, unless you want to play "casino", it's essential to manage your capital and risk before looking at expected profitability.

Preserving capital is more important than earning a lot quickly.

In fact, a loss of 50% means 100% of gains to be made afterwards to get back to the previous level (if I lose 50% of 1000$, I then have 500$, I'll need a gain of +100% to get back to 1000$).

By authorizing a maximum loss per trade (between 0.5 and 2%), we limit the risk of major DrawDowns, meaning that our capital can absorb several consecutive losing trades without being overly affected.

When setting up our strategy, we'll therefore be sure to take into account possible losses and their influence on capital before looking for quick and dangerous profits.

When you have no capital, you can't trade!

What beginner trader hasn't had a trading account completely liquidated or suffered such losses that it was no longer possible to continue trading?

Your capital is the basic element of your trading and you need to take care of it, because without it, you simply won't be able to earn anything. Considering risk is fundamental to your overall trading strategy.

There are always times when the market is unpredictable, so there are always losses!

The laws of statistics are as follows, 100% of winning trades is impossible even if the settings and backtesting of your strategy show that this has been the case in the past.

"Past results are no guarantee of future results".

So always consider the "worst case scenario" when setting up your capital management, and plan to be able to absorb losses or a sudden market downturn.

Greed and lack of patience are the trader's first enemies

It's tempting to bet big to win big, but in the long run, you could end up biting your fingers off. What's the point of an account that rises quickly and then, one day, due to a rare statistical reversal, is completely wiped out?

So think of trading as a long-term activity, to be approached with patience, and move away from the spirit of greed and the attraction of quick profits towards that of the rational investor who will always act to protect his capital and trade "as a good father".

Maximum loss of 2 % per trade (see 1%) is strongly recommended

The drawdown calculator allows you, on the basis of your stop-loss or the worst historical trade in your backtest, to anticipate the biggest possible loss and limit your exposure.

For prudent capital management, the maximum loss per trade should not exceed 0.5% of your total capital.
For balanced management, the maximum loss should not exceed 1% of your total capital.
For aggressive management, the maximum loss should not exceed 2% to 3% of your total capital.

If you risk more, it's at your own risk, as a string of consecutive losing trades is always possible, and you need to preserve your capital at all costs to be able to continue trading.

If you really want to take a big risk (with a very small account and money you're prepared to lose, for example) it's quite possible, with a well-adjusted strategy, to earn a lot more quickly and sustainably, but in this case be aware that your risk is very high. and don't delay with leverage to avoid at least the risk of being completely liquidated.

Smoothing risk with multiple bots: Principle and limits (including crypto correlation)

We don't want a bad trade to dent our capital too much, so we manage the risk we take on each position we enter.

Since, as a result, we enter positions with small amounts of our capital for each trade, we're not working our money to its full potential. How can we increase our profit without increasing our risk too much?

Use multiple trading bots on the same account but configured on different cryptos!

This increases the number of trades, and therefore the time our capital can be used, without increasing risk. per trade and per asset.

In this way, capital utilization is increased, while risk is smoothed out to some extent.

There is a limit to this method: most cryptocurrencies are closely correlated to Bitcoin. and in the event of a massive fall in Bitcoin, most of your strategies could record losing trades at the same time. Integrate this parameter into your set-up, by looking for cryptocurrencies less correlated with Bitcoin than others, or by not multiplying the number of your bots too much, for example.

Advantages and risks of using leverage

Leverage is both an opportunity and a great danger. It means being able to "multiply" the size of your position, and therefore your gain in the event of a positive trade, or your loss in the event of a negative trade.

The main advantages of using leverage are :
- The ability to take advantage of very small price variations on a market
- The possibility of betting more than your capital
- The possibility of mobilizing smaller shares in its capital (so that the remainder is available for other position inputs, for example).

The main (and significant) risks of using leverage are :
- Big losses in the event of a loss
- Full liquidation of the account if the liquidation price is reached.

Account liquidation means that your account falls to 0, because you no longer have the money available to cover your "loan" (leverage is a kind of loan).

Note the following generalities:

A LONG position with x2 leverage and 50% of price decline will be liquidated (even at around -49%, taking fees into account).
A LONG position with x4 leverage and 25% of price decline will be liquidated.
A LONG position with x10 leverage and 10% of price decline will be liquidated.
A SHORT position with x2 leverage will be fully liquidated if the price rises by 50%
Etc.
Exception for SHORTS only: With leverage x1, a short position where the price would increase by 100% would be liquidated.

The "cross margining" option allows you to use the liquidity available in your account to ensure that a particular position is not liquidated when these thresholds are reached, but if you do not have sufficient liquidity available your entire account will be liquidated.

The "isolated margin" option allows you to isolate a single position entry, and only the amount invested in this position will be liquidated if the liquidation price is reached. However, this liquidation price will be strictly equal to the figures presented above.

For our TopBot Anomaly strategies that do not use stop-losswe recommend not to exceed a leverage of x2

Isolated margin only. In the worst case, you will only lose the % of your capital (excluding leverage) that you have invested in your trade.

Why program a bot with 5% of capital in x2 leverage rather than 10% of capital without leverage and therefore without the associated risks?

In fact, if you're using just one bot for your trading account, we recommend that you don't use leverage.

If you use several bots, using x2 leverage allows you, with a reasonable risk, to minimize the number of bots. the amount of capital tied up and to better distribute the sums in the case of multiple entries in % of available capital.

Let's take an example for a programmed strategy with 3 entries, each at 10% of available capital:

The first entry uses 10% of our capital
The second uses 10% of the remaining 90%
The third uses 10% of the remaining 81%

If we now enter with the same final proportion of our capital but using leverage, i.e. 5% per leverage entry x2 :

The first entry uses the equivalent of 10% of our capital (5% x2)
The second uses the equivalent of 10% of the remaining 95% (5% x2).
The third uses the 10% equivalent of the remaining 90.25% (5% x2).

We can therefore enter more times in position and with position amounts closer together. But we are exposing ourselves to the risk (very reasonable with leverage x2) of liquidating our position by the very fact of using leverage.

Getting started in paper-trading is essential, and analyzing your losses is a must.

When you're just starting to implement your strategies and manage your capital, We always recommend starting with PaperTrading for one to six months. (see free training on our website or YouTube channel).

You're sure to avoid mistakes:
- Set-up techniques
- Risk assessment
- And you'll work on your patience and be able to study your strategy until everything is in place with limited risk.

In conclusion, always plan for the biggest loss and factor it into your strategy, and don't be too greedy.

If you follow each of these points and apply our free TradingView strategy for programming code-free trading robots TopBot Anomaly LITE or the Pro version available by subscription on our site, you're sure to avoid unnecessary losses and build a healthy, profitable practice to last a long time in your trading and the markets.

In conclusion, follow reason rather than emotion or the desire to make a quick profit at the expense of long-term security, and your trading will be profitable for a long time to come.

Happy trading!