TrailingStopRiskManagementModel.cs

/*
 * QUANTCONNECT.COM - Democratizing Finance, Empowering Individuals.
 * Lean Algorithmic Trading Engine v2.0. Copyright 2014 QuantConnect Corporation.
 *
 * Licensed under the Apache License, Version 2.0 (the "License");
 * you may not use this file except in compliance with the License.
 * You may obtain a copy of the License at http://www.apache.org/licenses/LICENSE-2.0
 *
 * Unless required by applicable law or agreed to in writing, software
 * distributed under the License is distributed on an "AS IS" BASIS,
 * WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
 * See the License for the specific language governing permissions and
 * limitations under the License.
 *
*/
 
using System;
using System.Collections.Generic;
using QuantConnect.Algorithm.Framework.Portfolio;
 
namespace QuantConnect.Algorithm.Framework.Risk
{
    /// <summary>
    /// Provides an implementation of <see cref="IRiskManagementModel"/> that limits the maximum possible loss
    /// measured from the highest unrealized profit
    /// </summary>
    public class TrailingStopRiskManagementModel : RiskManagementModel
    {
        private readonly decimal _maximumDrawdownPercent;
        private readonly Dictionary<Symbol, HoldingsState> _trailingAbsoluteHoldingsState = new Dictionary<Symbol, HoldingsState>();
 
        /// <summary>
        /// Initializes a new instance of the <see cref="TrailingStopRiskManagementModel"/> class
        /// </summary>
        /// <param name="maximumDrawdownPercent">The maximum percentage relative drawdown allowed for algorithm portfolio compared with the highest unrealized profit, defaults to 5% drawdown per security</param>
        public TrailingStopRiskManagementModel(decimal maximumDrawdownPercent = 0.05m)
        {
            _maximumDrawdownPercent = Math.Abs(maximumDrawdownPercent);
        }
 
        /// <summary>
        /// Manages the algorithm's risk at each time step
        /// </summary>
        /// <param name="algorithm">The algorithm instance</param>
        /// <param name="targets">The current portfolio targets to be assessed for risk</param>
        public override IEnumerable<IPortfolioTarget> ManageRisk(QCAlgorithm algorithm, IPortfolioTarget[] targets)
        {
            foreach (var kvp in algorithm.Securities)
            {
                var symbol = kvp.Key;
                var security = kvp.Value;
 
                // Remove if not invested
                if (!security.Invested)
                {
                    _trailingAbsoluteHoldingsState.Remove(symbol);
                    continue;
                }
 
                var position = security.Holdings.IsLong ? PositionSide.Long : PositionSide.Short;
                var absoluteHoldingsValue = security.Holdings.AbsoluteHoldingsValue;
                HoldingsState trailingAbsoluteHoldingsState;
 
                // Add newly invested security (if doesn't exist) or reset holdings state (if position changed)
                if (!_trailingAbsoluteHoldingsState.TryGetValue(symbol, out trailingAbsoluteHoldingsState) ||
                    position != trailingAbsoluteHoldingsState.Position)
                {
                    _trailingAbsoluteHoldingsState[symbol] = trailingAbsoluteHoldingsState = new HoldingsState(position, security.Holdings.AbsoluteHoldingsCost);
                }
 
                var trailingAbsoluteHoldingsValue = trailingAbsoluteHoldingsState.AbsoluteHoldingsValue;
 
                // Check for new max (for long position) or min (for short position) absolute holdings value
                if ((position == PositionSide.Long && trailingAbsoluteHoldingsValue < absoluteHoldingsValue) ||
                    (position == PositionSide.Short && trailingAbsoluteHoldingsValue > absoluteHoldingsValue))
                {
                    trailingAbsoluteHoldingsState.AbsoluteHoldingsValue = absoluteHoldingsValue;
                    continue;
                }
 
                var drawdown = Math.Abs((trailingAbsoluteHoldingsValue - absoluteHoldingsValue) / trailingAbsoluteHoldingsValue);
 
                if (_maximumDrawdownPercent < drawdown)
                {
                    // Cancel insights
                    algorithm.Insights.Cancel(new[] { symbol });
 
                    _trailingAbsoluteHoldingsState.Remove(symbol);
                    // liquidate
                    yield return new PortfolioTarget(symbol, 0);
                }
            }
        }
 
        /// <summary>
        /// Helper class used to store holdings state for the <see cref="TrailingStopRiskManagementModel"/>
        /// in <see cref="ManageRisk"/>
        /// </summary>
        private class HoldingsState
        {
            public PositionSide Position;
            public decimal AbsoluteHoldingsValue;
 
            public HoldingsState(PositionSide position, decimal absoluteHoldingsValue)
            {
                Position = position;
                AbsoluteHoldingsValue = absoluteHoldingsValue;
            }
        }
    }
}