Exactly...
Systematic Traders - How many systems do you run?
- Thread starter gmst
- Start date
Exactly...
Good points...You don't have to allocate new capital to each strategy. You can use some for opening positions, some for moving stops, some for confirmation and some others even for going flat.
Treating each strategy independently is what newcomers to trading do. This usually leads to ruin.
Yes, most of the strategies were cranked out by Price Action Lab. About 20% of them is based on my own indicators but not in the usual sense of the word.
Bill, can you please post your actual as well as backtested portfolio equity curve (and key ratios). If you are truly doing what you claim, it will be very interesting to look at some actual numbers and smoothness of your equity curve. Thanks a lot.
Also, if you don't have a formula to actually allocate capital to different strategies 'and' if you don't have a method to rank strategies, then how in the world do you backtest your portfolio performance? Not attacking you, just asking. Cheers.
it's widely known that intradaybill is another wannabe perennial loser who's only here to hawk that curve-fitting software priceactionlab that 's only good for making inferences from small sample sizes (like 15 results...i'm not kidding)
just check his post history..almost every other post will have some reference to that piece of shit software he so ardently believes in..
so fret none gmst you're not missing out any golden advice from this loser
What kinda % returns are you guys doing on a PA basis?
My only experience with this problem is theoretical. The way I look at it - prioritize capital allocation according to performance. Rank the strategies according to performance (monthly, semi-annual, annual, 5 year....whatever) then give trading priority to higher performing strategies over lower, if you run into capital constraints from multiple signals. For instance, if you've got enough capital for 3 trades, and 7 signals were produced by strategies ranked #3, #49, #19, #18, #8, #23, #12 (according to their historical profitability), take signals from #3, #8, and #12. This maximizes capital accumulation and minimizes draw-down (theoretically). The second filter to all that is correlation. My take on correlation (instrument and strategy), is that uncorrelated strategies and pairs should take priority over correlated instruments and strategies. If you trade the ES, YM (which are highly correlated), and CL (which is less correlated), and three entries are triggered, it's better to take the ES and CL, then the ES and YM. The reason being, losses get compounded in correlated markets. Not sure why another poster said they don't. If you think about one strategy triggering a buy for GOOG, ES, APPL and ER2, and the market tanks, chances are, all four positions will take a hit. Stocks and the indices are tightly correlated. But if you were triggered long for the ES, 10 year, Bund, and the Euro and the market tanked, chances are, one or two of those trades would work out, as some of those instruments exhibit weak correlation. This minimizes your losses and protects your equity curve, which is number#1.
As far as nitty gritty stuff, trade size should be largest for your best strategies, and titrated down as strategies become less profitable. You want to maximize capital accumulation so weigh to your big guns first, 2nd best 2nd, 3rd best 3rd etc. Ranking can be done on a risk-adjusted basis with 1 contract, over a predefined look back. Or an average look-back. No need to curve-fit. It should be obvious, which are the best, which are second tier, third tier etc. I find it helpful to think in terms of Tiers.
I've got around 15 strategies that work and plan to add 2 or 3 variations to each "base" strategy. Pyramiding can be very profitable. Every system, if you think about it, is trend following, because it picks direction (long or short). If the strategy is profitable, why not add to it? So I've got another stack of ideas for pullback entries. These are abundant and not really something that requires a lot of thought. U can add on pullbacks, on candle breaks, volume breaks, formations, trendline breaks, oscillator crosses etc. Doesn't matter. If you strategies are solid, and pick direction well, you should be able to find logical, easy, plentiful places to ADD to that position. This compounds winners. Just some thoughts.
That other poster was probably me, but you're right with the preference of uncorrelated markets. Problem is, when you trade 20 markets, each of them is most likely correlated to 10 of the others. My point was that you can trade them nevertheless. In the worst case you'll get the same return: trading two 100% correlated markets will just produce the same profit when you assign 50% of your capital to each of them. If the markets are less than 100% correlated, which is normally the case, you'll improve your return.
Normally you would not rank strategies by performance, but calculate capital assignment factors from the equity curves of the separate strategies. There is no closed formula for those factors. You need a computer optimization, but it's fairly simple. Ralph Vince described the method in his books.
Quote from JuniorCTA:
1 system, all markets
My man... I've found through nightly study of markets, one could use 1 pattern and make a very good living in most any markets. The only problem is it requires specific conditions.