I am going to revisit the hedging strategy. The original testing was a bit flawed as I was using one minute data. I need to use TICK data so I can determine the exact tick(s) where the portfolio open positions go into the red. The concept is to fade the open and losing positions while the open positions as a group are down. Should know something by Monday.
Adventures in Automation
- Thread starter fan27
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Where are you getting your tick data from? Also, why do you think tick data will help lose less money than 1 minute data? Why not just set your stops at the red?
TICK data from IQFeed. First, let me state the problem I am trying to solve. My strategies are highly correlated and I already have a method for limiting the number of concurrent positions. However, my wins and losses are often grouped together resulting in an equity curve that is not as smooth as I would like it to be. My plan is track all open positions via a C# extension I wrote for AlgoTerminal. A singleton class keeps track of all of my open positions and their state and the class can be accessed in any strategy that is running. My strategies will still use 1 minute data as the source data but to test this in a simulation I need TICK data so the hedging strategy will know the moment the group of open positions go into the red. I do not want to set my stops at the red because I do not want to exit the position. Let's say I have the following positions:
2 ES
1 NQ
2 YM
Let's say at the moment the group of positions go into the red, the NQ and YM positions are in the red (ES is up). The hedging strategy would Short 1 NQ and 2 YM until the group of positions are in the green or until the target position is stopped out. The four positions that I had go bust just the other day would not have been a loss because while the positions were going down I would have been net flat. The obvious problem I need to over come is a situation where the group of positions go from green to red to green to red to green to red. etc. This would result in multiple Short trades where I could in theory get chopped up with very small losses. If this can be overcome, I think this approach makes sense.
I think this is going to be painful for you but I hope I'm wrong...
If your strategies are correlated, why not find uncorrelated strategies or trade different markets? That to me seems like a better hedge.
If your strategies are correlated, why not find uncorrelated strategies or trade different markets? That to me seems like a better hedge.
It's not going to be painful. Either the research will bear fruit or it will not. Yes....expanding to different markets is on my to-do list.
That seems to be the right way to go about it. When trading indexes, I always choose the one's with least correlation. The main three US indexes are strongly correlated.
Exit 1 ES at 3018.50
+$1595.9