|
PureBytes Links
Trading Reference Links
|
--- "Fred" <fctonetti@xxxx> wrote:
> Chuck / b,
> I hate to answer questions with questions ... but ...
>
Fred,
You raise a number of significant questions, some deal with details
of how a multiple portfolio module could work and others touch on
why one would want a multiple portfolio approach. First, my answer
to why someone who want to trade 2 or more systems -- reduce
drawdowns is the answer. If one is practising risk management,
reduced drawdowns can increase profit (a bigger exposure can be
taken for the same risk level.)
In a previous post, my illustration pictured money being taken from
a winning method and given to a loosing one. That was a poor
illustration. In real life, the goal would be to trade
simultaneously 2 systems which are both excellent by themselves. By
trading them as a pair that share profits, the hope would be to
reduce drawdowns without sacrificing profits. If one can reduce
drawdowns, then a larger exposure can be taken -- to obtain higher
profits.
Now to your detailed questions about what features should be in such
a trading module. I will attempt to indicate what I had in mind by
listing the types of setting that could included. Pseudo AFL will be
used as a format:
MakePortfolio (ID, IDname, MaxStocks, PCofCAPITAL, RankingVariable,
SlippageType, SlippageAmount);
MakePortfolio (1,"LongMETHOD_1" , 10, 5, myLongMETHODscore, 1, 0.25);
The above would create a portfolio with a numerical ID of "1" and a
name used in reports of "LongMETHOD_1". It would have a maximum of
10 positions and each position would be 5% of the initial capital.
Thus the above would trade a maximum of 50% of one's total
capital. "myLongMETHODscore" is the name of ranking variable to be
used. SlippageType "1" indicates slippage will be a percentage
and "1.5" indicates the percentage is 1.5%.
In the above, I would consider SlippageType and SlippageAmount to be
nice but not necessary. It would be nice to be able to specify
different slippage assumptions for each method, but one could still
get useful results if all methods used the same value (whatever AB
was set to use).
What about the following?
MakePortfolio (1,"Long_1" , 10, 5, Long_1score, 1, 0.25);
MakePortfolio (2,"Long_2" , 10, 2.5, Long_2score, 1, 0.25);
MakePortfolio (3,"Long_3" , 10, 5, Long_3score, 1, 0.25);
MakePortfolio (4,"Short_1" , 10, 2, Short_1score, 1, 0.25);
MakePortfolio (5,"Short_2" , 10, 1, Short_2score, 1, 0.25);
MakePortfolio (6,"Short_3" , 10, 3, Short_3score, 1, 0.25);
Assuming the Long and Short scoring is set up so one has to be
either long or short (not both at the same time), then the above
would be trading 3 stategies each way. On the Long side the total
exposure is 10x5 + 10x2.5 + 10x5 = 125%. That is a way to specify a
small amount of margin leverage ont he long side. On the short side
the maximum exposure is just 60% of capital.
You ask what happens to excess capital if it can not be allocated
due to insufficient stock. For myself, I would be happy to just let
that unused capital remain unused. The current low interest rates
make coding in a money market fund return to be hardly worth the
effort.
Fred, does the able help answer some of your questions about what I
was suggesting.
b
------------------------ Yahoo! Groups Sponsor ---------------------~-->
Get A Free Psychic Reading! Your Online Answer To Life's Important Questions.
http://us.click.yahoo.com/Lj3uPC/Me7FAA/ySSFAA/GHeqlB/TM
---------------------------------------------------------------------~->
Send BUG REPORTS to bugs@xxxxxxxxxxxxx
Send SUGGESTIONS to suggest@xxxxxxxxxxxxx
-----------------------------------------
Post AmiQuote-related messages ONLY to: amiquote@xxxxxxxxxxxxxxx
(Web page: http://groups.yahoo.com/group/amiquote/messages/)
--------------------------------------------
Check group FAQ at: http://groups.yahoo.com/group/amibroker/files/groupfaq.html
Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
|