Trading a strategy across multiple markets....better or worse?

F

funky

i now have a strategy that i've backtested on about 20 major equities, and 4 major indices. of those so far, this strategy performs good on 50% of the equities, great on 30% of equities, and poorly on the rest, including the indicies.

my question now is: should i take the best performing markets for this strategy, and split my portfolio among them and trade the strategy in parallel on each? or should i stick with the very best market and devote 100% to it?

my thinking is that splitting across is the way to go, then if one market is not performing good anymore, i don't take that big of a hit. i just wanted to hear from experienced traders what they do, and how they manage their portfolio with a single strategy.

my account is very small at this point, so size/liquidity issues aren't that big of a factor right now. about the only thing that i am worried about is making sure i stay above the 25k limit.

thanks :)
 
Quote from funky:

i now have a strategy that i've backtested on about 20 major equities, and 4 major indices. of those so far, this strategy performs good on 50% of the equities, great on 30% of equities, and poorly on the rest, including the indicies.

my question now is: should i take the best performing markets for this strategy, and split my portfolio among them and trade the strategy in parallel on each? or should i stick with the very best market and devote 100% to it?

my thinking is that splitting across is the way to go, then if one market is not performing good anymore, i don't take that big of a hit. i just wanted to hear from experienced traders what they do, and how they manage their portfolio with a single strategy.

my account is very small at this point, so size/liquidity issues aren't that big of a factor right now. about the only thing that i am worried about is making sure i stay above the 25k limit.

thanks :)
More...

Not a bad idea. It is good to diversify ones method across non-correlated entities. If you decide to do this choose the best performing ones on your method. This will ensure that you obtain the highest odds in your favor. Be sure to research "WHY" your system performed better in those markets? If you are using a trend following method then it is very likely that your system found the beginning of a great trend so be sure that if the market is trending that it is at the beginning stages and not near the end.
You do not want to be the last person left standing without a chair when the music stops!
 
also, how do you guys determine at what point to stop trading a market with a particular strategy, after it deteriorates? i guess the biggest challenge for me now is to find out how to 'track' the efficiency of my strategy in a given market. like you said t-rex, finding what makes the strategy work so well for a given market is key....thanks :)
 
Do you have non-correlated markets? T-rex assumed that. If so the ones that are not working now ....do they work when the ones that work now don't? Do they give you a good spread and an edge. Would you weight them 1:1 for your hedge?

I think what you were saying was that you wanted to diversify, not necessarily hedge. You figure that if your system will work on enough instruments you will net plus at the end of the day.

Without knowing your methodology the answer to your question is tough. The old saying "Don't put all your Eggs in one basket" is really not at issue here. You want to protect your capital and still be able to Pattern Day Trade.

Michael B.


Quote from funky:

also, how do you guys determine at what point to stop trading a market with a particular strategy, after it deteriorates? i guess the biggest challenge for me now is to find out how to 'track' the efficiency of my strategy in a given market. like you said t-rex, finding what makes the strategy work so well for a given market is key....thanks :)
More...
 
yes, i have markets that are non-correlated. actually, i just tested this on the qqq's and it works, just not as well :)

they seem to not have drawdowns at the same time. i think i might have just figured out an 'indicator' that predicts when profits come and when drawdowns come. this is pretty exciting. i stumbled across it really. now i just have to run some more simulations with the indicators and see if i can take a group of markets, and 'choose' which ones i would trade.

i guess this is where portfolio simulation comes in handy!!! maybe i might see if i can play with wealth-lab next week to simulate this. if all goes well, i SHOULD be able to bring markets in and out of my trading system per this indicator.....we'll see.


Quote from ElectricSavant:

Do you have non-correlated markets? T-rex assumed that. If so the ones that are not working now ....do they work when the ones that work now don't? Do they give you a good spread and an edge. Would you weight them 1:1 for your hedge?

I think what you were saying was that you wanted to diversify, not necessarily hedge. You figure that if your system will work on enough instruments you will net plus at the end of the day.

Without knowing your methodology the answer to your question is tough. The old saying "Don't put all your Eggs in one basket" is really not at issue here. You want to protect your capital and still be able to Pattern Day Trade.

Michael B.
More...
 
Savant scratches his head and says to wifey....wasn't that funky driving by in that new car?....she said didn't you hear? he made it real big in trading. :)

Michael B.



Quote from funky:

yes, i have markets that are non-correlated. actually, i just tested this on the qqq's and it works, just not as well :)

they seem to not have drawdowns at the same time. i think i might have just figured out an 'indicator' that predicts when profits come and when drawdowns come. this is pretty exciting. i stumbled across it really. now i just have to run some more simulations with the indicators and see if i can take a group of markets, and 'choose' which ones i would trade.

i guess this is where portfolio simulation comes in handy!!! maybe i might see if i can play with wealth-lab next week to simulate this. if all goes well, i SHOULD be able to bring markets in and out of my trading system per this indicator.....we'll see.
More...
 
shaaa...i wish!! i've just about filed my flight plan, now i have to fly the damn thing :O

Quote from ElectricSavant:

Savant scratches his head and says to wifey....wasn't that funky driving by in that new car?....she said didn't you hear? he made it real big in trading. :)

Michael B.
More...
 
Well, Good trading to you.....I think you are on the right track...2004 may be YOUR year.

Michael B.



Quote from funky:

shaaa...i wish!! i've just about filed my flight plan, now i have to fly the damn thing :O
More...
 
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