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Interesting. Thanks.
--
Terry
-----Original Message-----
From: amibroker@xxxxxxxxxxxxxxx [mailto:amibroker@xxxxxxxxxxxxxxx] On
Behalf Of Yuki Taga
Sent: Sunday, October 30, 2005 01:58
To: Terry
Subject: Re: [amibroker] margin account and position sizing
Hi Terry,
Sunday, October 30, 2005, 4:18:37 AM, you wrote:
T> I have found, and maybe there is a better or more correct method,
that
T> to change margin to 50% in code you must DOUBLE your PositionSize to
get
T> the same answers you get when you don't have code and just set 50 in
AA
T> Margin Settings.
T> So I do this:
T> marg_val = paramtoggle("Margin","50,100",1);
T> PositionSize = PositionSize * 100/marg_val;
T> There are other settings I posted yesterday in a complete
SetOptions.afl
T> include file.
T> In reality you are correct about margin. Your broker will not use
margin
T> unless/until you invest your entire account, and then it won't be
double
T> until you have invested double your entire account. This only makes
T> sense, if you have the cash, why pay interest on borrowed money.
Margin
T> is not like futures (or Rydex) where you actually get 2:1 on your
T> investment.
T> --
The rules are different, all over the globe, of course, and even from
broker to broker in the same country. In Tokyo, for about five years,
we've had 3:1 margin. Even then, your leverage can be greater,
because shares purchased in the cash account are considered loan
collateral (at my broker), the same as cash, only marked to market
each day. So, if you had the US equivalent of, say, 500,000, you
would have 1.5 million available in your margin account. Moreover,
you could spend all the 500,000 in the cash account on stock, and you
would *still* have 1.5 million available in margin buying power
(assuming your cash stock retained its value, or increased). So you
could actually work with 4:1 leverage here, if you were a real
gunslinger. I rarely go that far out on the limb. My trading record
suggests that I actually should (I consistently make money), but
there is always the big unforeseen accident waiting to happen
somewhere, and I really don't need to work with that kind of stress
anyway.
As for why one would buy in a margin account even with plenty of cash
available:
Commission on a margin trade at my broker right now is 450 yen plus
sales tax (about $US 3.90 at the current rate; tack on another 20
cents for our 5 percent sales tax), no matter the size of the trade.
That's versus a maximum commission on a cash trade of 1,500 yen plus
sales tax (you can pay less, but everything I trade hits that
maximum). If you are day trading, or very short term swing trading,
and depending on how large you are trading, there may be excellent
reasons for trading only in a margin account. Sure, you are paying
(in Japan, at present, extremely low) interest to "borrow" your own
money. But if the net profit is still higher by paying less juice
than the difference between the different commissions, margin is
certainly the way to go.
Yuki
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