Risk Management

Effective risk management prevents catastrophic losses. QSL strategies implement risk rules directly in onBar() logic.

ATR-Based Stop Loss

ATR (Average True Range) adapts your stop to current volatility:

function init(ctx) {
  ctx.addIndicator('atr', 'ATR', { period: 14 });
  ctx.addIndicator('ema', 'EMA', { period: 20 });
}

function onBar(ctx, i) {
  const pos = ctx.position('ASSET');
  const close = ctx.series.close[i];
  const atr = ctx.ind.atr[i];
  if (q.isNaN(atr)) return;

  // Entry
  if (pos.qty === 0 && q.crossOver(ctx.series.close, ctx.ind.ema, i)) {
    ctx.order.market('ASSET', 1, {
      signal: 'buy',
      stopPrice: close - atr * 2  // Store stop level in metadata
    });
  }

  // Stop loss: exit if price drops 2x ATR below entry
  if (pos.qty > 0) {
    const stopLevel = pos.avgPrice - atr * 2;
    if (close <= stopLevel) {
      ctx.order.close('ASSET', { signal: 'stopLoss' });
    }
  }
}

Percentage-Based Stop and Target

Simple fixed-percentage rules:

function onBar(ctx, i) {
  const pos = ctx.position('ASSET');
  const close = ctx.series.close[i];

  if (pos.qty > 0) {
    const pnlPct = (close - pos.avgPrice) / pos.avgPrice;

    // Stop loss at -3%
    if (pnlPct <= -0.03) {
      ctx.order.close('ASSET', { signal: 'stopLoss' });
      return;
    }

    // Take profit at +6% (2:1 reward-risk)
    if (pnlPct >= 0.06) {
      ctx.order.close('ASSET', { signal: 'takeProfit' });
      return;
    }
  }
}

Trailing Stop

Lock in profits as the trade moves in your favor:

function onBar(ctx, i) {
  const pos = ctx.position('ASSET');
  const high = ctx.series.high[i];
  const close = ctx.series.close[i];

  if (pos.qty > 0) {
    // Track the highest price since entry using lookback
    const barsSinceEntry = 20; // Or track via metadata
    const highestSinceEntry = q.highest(ctx.series.high, barsSinceEntry, i);

    // Trail stop 3% below the peak
    const trailingStop = highestSinceEntry * 0.97;

    if (close <= trailingStop) {
      ctx.order.close('ASSET', { signal: 'trailingStop' });
    }
  }
}

Tiered Profit Taking

Reduce risk progressively as the trade succeeds:

function onBar(ctx, i) {
  const pos = ctx.position('ASSET');
  if (pos.qty <= 0) return;

  const close = ctx.series.close[i];
  const gain = (close - pos.avgPrice) / pos.avgPrice;

  // Take 1/3 at +3%
  if (gain >= 0.03 && pos.qty > 0.6) {
    ctx.order.reduce('ASSET', 0.33, { signal: 'tp1' });
  }

  // Take 1/3 at +6%
  if (gain >= 0.06 && pos.qty > 0.3) {
    ctx.order.reduce('ASSET', 0.5, { signal: 'tp2' });
  }

  // Close remainder at +10%
  if (gain >= 0.10) {
    ctx.order.close('ASSET', { signal: 'tp3' });
  }
}

Risk-Reward Filtering

Only take trades where reward potential exceeds risk:

function onBar(ctx, i) {
  const close = ctx.series.close[i];
  const atr = ctx.ind.atr[i];
  const pos = ctx.position('ASSET');
  if (pos.qty !== 0 || q.isNaN(atr)) return;

  const stopDistance = atr * 2;
  const targetDistance = atr * 4;  // 2:1 R:R ratio

  // Only enter if there's room to run
  const resistance = q.highest(ctx.series.high, 50, i);
  const upside = resistance - close;

  if (upside > stopDistance * 2) {
    ctx.order.market('ASSET', 1, { signal: 'buy' });
  }
}

Key Principles

1. Always have an exit plan — every entry should have a defined stop loss
2. Size positions relative to stop distance — wider stops need smaller positions
3. Use ATR over fixed percentages — adapts to changing market conditions
4. Consider fees — tight stops with frequent trading erode capital through commissions (default 0.1% per side)

Related

• Position Sizing — Capital allocation
• Commissions & Fees — Fee model details
• ctx.order.reduce() — Partial exits