Size ladder tests for drawdown caps and expected value

What the size ladder held fixed

The archive traded a fixed share count and did not reinvest profits. A 5-dollar commission plus a 5-dollar slippage charge was applied on every entry and exit.

Long and short procedures were run separately. Only one side could be open at a time, and each side could use its own fast and slow lengths. Costs, stops, skip rules, and those side settings stayed in place while share count changed.

Expected value as a setup filter

Expected return per trade was defined as win rate times average win plus loss rate times average loss. That figure was used to compare individual entry and exit setups.

Expected value, in the sense used here, is a probability-weighted estimate of average outcome per trade. It is applied as a filter before entry and again as size changes.

Dedicated stops instead of a conventional stop-loss

Conventional stop-losses were omitted. Most entries carried dedicated stops that usually needed extra conditions such as contraction before they could execute.

Some long entries fixed a channel stop at the 25-bar lower band offset by 1.5 times average true range. Another long stop moved with each bar’s low by the same 1.5-times offset and did not require contraction.

A long-side rule placed a stop at the low after a 500-dollar open loss if both the fast and slow curves were below that low. On the short side, two consecutive trades with a growing loss could set a close-based stop instead of a conventional stop-loss.

Expansion, contraction, and volume gates

Expansion was required in 2 of 6 entries. Contraction was required in 9 of 14 exits, including several stops. A missing expansion was used to skip a sideways failed breakout.

Expansion is a widening gap between a faster and a slower regression curve, used to allow some entries and to skip flat failed breakouts. Contraction is a narrowing gap between those curves, used as a required extra condition on many exits and stops rather than as a standalone close.

Volume scaled into a 0-to-1 range gated entries differently by side. Longs allowed values up to 0.5. Shorts required values above 0.85 or 0.9. That scaled series is normalized volume: volume scaled into a 0-to-1 range from its recent high and low, then used as a side-specific gate.

Prepaid equity on the share-count ladder

The same procedure was tabulated across 2 through 12 shares and a 100-share one-contract case. The table was then split for analysis because the one-contract row behaved differently from the smaller-size group.

Return on account was defined as net profit divided by maximum intraday drawdown. That drawdown figure was treated as the equity required to run the size, which is the prepaid equity that a drawdown limit is meant to bound before a trade is placed and while it is open. Expected return versus share count was described as a straight line in that test design.