Bot allocation limits are in place to safeguard traders and force you to think critically about all positions in your portfolio.
Allocation and position limits were designed to prevent you from overtrading inside any bot. These limits are how bots follow your rules and determine that you have enough capital available for a strategy and that you’ve set your appropriate daily and total position limits that the bot will use.
When you create a bot, you must enter specific allocation and position limits in the global settings.
Bot capital allocation limits are calculated at position entry. These are important limits that the bot must adhere to for all trading and ensures your exact instructions are followed.
This is another great example of how you can transfer portfolio management to your bot and trust that it will do exactly what you want.
Anytime a position or allocation limit is reached, the bot will no longer open new positions until a trade is exited (through the bot or manually), or more capital becomes available.
You can always edit the global setting to reflect changes in your account or strategy. The Bot Log and Position tab record all activity in the bot and displays when and where an automation encountered an error related to the global settings.
Bot allocation limits were put in place for your protection and to give you peace of mind that you are never over-allocated to one bot or one position. Of course, this means that you must think strategically about your bots and how they fit into your total portfolio management.
We highly suggest that you take the time to map out every position bot by bot and map out your portfolio from a holistic point of view.
Hi everyone. In this video I want to show you how bot allocation limits work to protect you from overtrading inside of any bot that you’re currently running.
This is one of the hallmark things that we did when we built out the new autotrading platform is we set these global allocation and position limits and capital limits that you have to put in to every bot that you’re currently running to make sure that it prevents you from overtrading or prevents you from over allocating capital and protects your account.
These are really important global limits that the bot listens to for all of the trading that it does to make sure that it’s following your exact instructions.
So, you can get to your settings here inside of any bot that you’re currently running right up here in the settings, in the gear icon, and then you can see a bunch of the different ways in which we limit or allocate capital to the bot.
I want to go through this with you, so you understand how they work and then kind of use some of them right here inside of a live bot to show you how they prevented from getting into certain positions or over allocating capital.
Now this current one that I have is a "Trendy Short Put Spread" and I’ve naturally allocated to it a very small amount because it’s only meant to trade one position at a time. It’s probably one of the lowest allocations that you can do is just allocating 1000 dollars to it, and then my position limits are set to one position opened in a day at a time so it can never enter more than one position per day.
I have my total position limits set to one position as well. This means that even if it could open more positions at one time, which we can’t, it will only be allowed to open one position or have one position open at a time.
Now if I wanted to, I could simply change any of these settings here and start to shift and alter the risk profile of the bot and how much capital and how much trading it can do. I can simply change the total position limit here to two positions.
This still means that it can never enter more than one position in a day, but it could enter exactly two positions. One position today and maybe one position tomorrow. So that’s how the differences work between the daily and the total.
So right now, if I still have it set as one, I’ll just save and go back to my bot here, you can see that the bot does have one position that’s currently open. So that means it has its full allocation.
This means even if I try to force a brand new position into the bot, say I want it to do some sort of long call option in SPY, whatever it was, if I try to place that trade and force that position into the bot, I would get an error message.
And the error message would say that the bot could not add a new position because its daily limit or its limit of one position has already been reached. So, it prevented the bot from entering a new position.
Now that was one I was just entering a new position just from the manual dashboard here on the position tab. But even if I try to enter a new position by running this "Put Spread Automation" scanner, and if I just try to run this scanner instantly which would generally open a new position.
If I try to run that automation and simulate like it was running in the background, again, I would go to the log and I would get another error. And this would again tell me that I couldn’t enter the position because I’ve already reached my limit.
These are some of the ways in which we want in to include these limits to protect you from over trading beyond your comfortable threshold inside of a particular bot.
Now if you want it to, you can of course adjust these thresholds. So, in this case, let’s go through and start playing around with this and see how it might impact the bot and the positions that it can get into. The first thing that we can do here is we can change the total limit to two positions. That’ll be an easy way to start adjusting this up and start giving the bot more room to run.
In this case, we can save it now and we can go back to our screen here on the Positions tab. And notice that we have one position of two positions available. This means that if I did want to, I could enter another position and I could add another position to this particular bot.
Let’s go over here to our automations and let’s again run really quickly just this "Short Put Spreads" scanner with the trend filter that I typically have running in this bot. So we’ll run it here again and we’ll run this automation and then go to the log and now we can see that the bot has, in fact, been hit with another error.
So, the question is now, well, why does it have an error? It does have the ability to get into two positions and inside of the listing I see two positions, but one of them is in fact an error.
Because I gave the bot the ability to enter two positions, it tried to enter that second position, but the error that it now encountered was a capital error. Now I’ve started to over stretch the capital that the bot has available.
In this case, I don’t have enough capital, the only capital that I have left is $290 and every one spread contract that I was trying to get into cost a margin requirement of $956.
I can see this very clearly right on the dashboard when I go down on my capital. I see how much net liquidity the bot is carrying and how much available capital I have left to trade and that’s because my allocation is set to $1,000.
So, this is really important because even though inside of my bot settings I’ve given the bot room to make more trades and the bot try to enter new positions, it was hit with the total allocation limit.
This is again, really good, because that means that the bot is going to stop and not over allocate beyond how much capital you’ve deemed necessary or in total to the bot right here in the settings. So, in order to clear this and now try again, we’re going to go to our position tab and we’re going to clear the error.
We do this on purpose to show you that the bot ran into a specific error when trying to get into a position. This means it had room to enter a position, but it didn’t have enough capital to do so. So, we're simply going to go ahead and cancel that position and remove the position from our position listing.
Now when we go back to the position tab, you can see we again have one position and we have two positions that we could get into, so we still have another slot left for another position.
If we go into our settings here, we’re going to make some additional changes so that we give the bot a little bit more room to run and add positions. We’re going to increase the allocation to $5,000 and we’re going to increase the daily limits that it can trade of two positions and the total limit of two positions.
So, we’re going to stretch it a little bit and give it a little bit more capital. Now when we go here and save it should give us a lot more room to enter new positions.
Notice when I go back to the dashboard now, I have a lot more capital available to trade. So, I should be able to enter this new position right away because it has room and it has some allocation capital that it was given.
Now if I go here and if I run this automation again just instantly to see if I can get into another position, when the automation runs and I get to the Bot Log, you can see that it did in fact effectively run today at 1:46. This is exactly what it should’ve done.
It got into a new position here because it went through all of the criteria and all the checks to get into a new position and it had enough room and availability inside of the portfolio to grab that second position.
So that’s what it did, grabbed another position. Now let’s try it again.
Let’s try to, again, force this thing and see if we can run into another error, because we’ve already gotten into our two position limits. We’re going to try to run this automation again and here we go back into the log and you can see we ran into another error. Now this error wasn’t because of the capital like this first one here.
Notice we didn’t have enough capital earlier today. This error was now reached because, although we had capital, we didn’t have enough position limit to allow the bot to enter more than two positions. So, this is some of the ways in which the bots can listen to and follow the rules that you basically set inside of your global settings.
These are all here to protect you to make sure that the bot is doing exactly what you want it to do. That you have enough capital available for the strategy, that you’ve set your appropriate position limits both daily and total.
And remember that the bot is always going to use this as its North Star for entering and exiting positions. Notice that all of these position limits are all surrounding bots getting into positions and opening positions. This has nothing to do with bots closing positions, of which there are no limits in place for closing positions.
So even if I went down and reset my daily position limit to just one position per day, that only means that the bot can open a brand-new position just one per day. It has nothing to do with actually closing positions.
So, if I go here and if I save this, I can go back here into my positions and notice that I can go in and close any position I want at any time. I can simply just close this position I just opened and get my positions back down to the one that I had before.
Notice I didn’t run into any errors. The bot always allows you to close positions and remove positions from your account whenever you want.
So that’s one of the ways in which you can use some of these position limits to limit your trading and prevent you from over trading in your account.
As always, it’s important that you go through and you know exactly what limits and criteria you’ve set in your bot because the bot is going to follow these rules as it starts running.
As always hopefully you enjoy this. If you have any questions let us know, and until next time, happy trading.