Trade Management for 2 trading schools (Continuation Vs Mean-Reverting:)

P

palm

Hi All,
I am now trading continuation systems and would like to add a mean-reverting system to compliment my portfolio. I compare the returns distribution of the two systems below. (pls see attachment)


The red curve is for MR while the green one is for CON systems. Both have positive expectations. You can see that the big chunk of returns is cluttered at small gains level for MR. My question is on exit strategies. Given these two systems, how would you design exit strategies differently.
Exit strategies issues are
1.) Stop-loss
-(Fix or volatility-based)
-(Tight or loose)
2.) Profit-target
-To have or not to have
-Tight-loose
3.) Time-Exit
-To have or not to have
Anyone has experience dealing with MR type systems?

Any other thoughts are welcomed. Thank you
 

Attachments

Quote from palm:

Thanks for your reply, D08

What's 5+ years and what's TBE?
More...

5+ years of trading and testing. TBE = Time Based Exit.
 
Quote from palm:

[B
The red curve is for MR while the green one is for CON systems. Both have positive expectations. [/B]
More...

Hello Palm. Thank you for sharing your results.

However, when you say "positive expectations" I assume that you used some exit criteria in your backtesting? If not, I'm unclear on how you could deduce a positive expectation without the exit criteria implicitly defined?

Or, are you looking at 'close-to-close' say, or something similar?

Thanks
 
I used 5 days time-exit. (exit at the close on the fifth days) My CON system also has 5 days exit. So i hope my new MR system will compliment the portfolio.
 
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