Question about C2 leverage calculation

It’s only an illusion.

“If leverage goes up while their account equity goes down - boom - probably martingale.”

Not necessarily, because as your equity plummets (because you are using large stops or no stops at all), the C2 leverage will automatically increase (even if you are not averaging down or using a martingale), but simply because your capital is decreasing, nothing more.

Anyway, nice conversation, thanks for your input.

“ It’s only an illusion.”

Nope. It’s the same as volatility. A 2% stop is going to get hit a lot more if you’re trading vix futures than trading treasuries, because vix futures are more volatile. Leverage adds volatility and increases the risk of hitting your stop.

“ Not necessarily, because as your equity plummets…the C2 leverage will automatically increase”

It’s a matter of degree. If a futures strategy’s equity drops 10% but leverage jumps from 10x to 60x - that’s martingale. This is an easy way spot it without having to look through individual trades.

“ Anyway, nice conversation, thanks for your input.”

You too. Have a great Easter and long weekend!

You too buddy, and best of luck with your Ethos systems (even though luck has very little to do with profitable trading).

PS: Edmonton (Canada), eh? Great little city, I have a few Canadian friends there. :slightly_smiling_face: