Starting account size as a survival filter

Starting account size is the cash allocated before the first live order. In the archive workflow that cash is chosen from the strategy's own drawdown and ruin profile rather than from a venue minimum.

Why initial margin is a poor size rule

Initial margin is the venue-set deposit required to hold a contract. It measures capital lockup, not a strategy's loss path. Exchange initial-margin requirements, and simple multiples of those requirements, are a poor basis for starting account size because they are set for venue participation and self-protection and are not tied to a given strategy's risk characteristics.

In an illustrative gold-futures case, an initial margin of 4950, or three times that figure at 14850, is presented as an inadequate account-size rule.

A drawdown-limit floor from strategy history

A drawdown limit is a bound on loss relative to equity, stop distance, volatility and exposure, set so a stretch of losses cannot force an unplanned exit. A drawdown-limit approach uses the strategy's own history and treats the backtested maximum drawdown plus required margin as a starting-capital floor.

Because a later worst drawdown is expected to exceed the backtest peak, that historical maximum is scaled by a drawdown multiplier between 1.5 and 3 before it is added to margin. The drawdown multiplier is a conservative scale applied to the largest historical equity decline so later losses can exceed the backtest peak.

In the worked example, a historical maximum drawdown of 10000 implies a padded buffer of 15000 to 30000 plus initial margin when that 1.5-to-3 multiple is applied.

How starting size changes risk of ruin

Relying on a backtest peak drawdown still leaves a gap, because that past decline may not represent later losses.

Risk of ruin is the chance that equity is driven so low the strategy cannot continue. It is used as a filter on account size and exposure before entry and while a position is open.

Monte Carlo simulation is repeated random resampling of a strategy's historical trades to build many equity paths and compare how starting capital changes ruin outcomes. Resampling a system's closed trades can generate thousands of alternative equity curves and show how risk of ruin changes with starting account size. Under that simulation view, risk of ruin rises sharply as the starting account becomes smaller.