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

Depending on your system it is not unusual that performance various from stocks to indices. Just make sure that you did real portfolio level backtesting with real portfolio money management. This is not only important to determine the real drawdown but also possible profits. Also consider Monte Carlo analysis before investing!!
 
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...

Non-correlated entities would be Soybeans to the ES or Crude Oil to Cotton or Fannie Mae to Krispy Kreme.

Believe it or not the firm I once worked for had a guy who was a Laser Physicist at NASA and he happened to be the best statistical guy I have ever met. His statistical systems that he programmed in Excel were the most exhaustive I've ever seen. He programmed this statistical non-correlated matrix that demonstrated on a daily basis the % or correlated vs. non-correlated and you would be surprised to see the relationship on any given day. Cotton may have a 100% correlation with Copper today and just 1 month ago it was a - 237%.

Finding a non-correlated market to trade is tough but it is not just for Hedging. It is to diversify yourself as to take advantage of what is happening across the board.
 
I am not sure if you are trying to say that correlation is more a question of discretion/logic then of a mathematical figures - if so then I agree. :) As mentioned before you should test it on a portfolio of various symbols to see the effect also use sound money management.
 
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?

thanks :)
More...

Seems to me that if you have gone this far in creating and backtesting a strategy, you should by now have an indepth understanding of how and WHY it works, or does not work, in each market you've studied. There is a logic and rationale behind every successful strategy, and you should be able to answer your own questions about where to put it to work. If you aren't really comfortable with that, you probably need to continue your own research. Nobody else can help you with that.
 
You must log in or register to reply here.
Back
Top