analysis

LOL I love the pun.

 

Yes, you should definately hedge against something highly-correlated. Problem is, your returns will be MUCH lower but risk should be much lower.

 

Truthteller, Stephen

Thanks for the criticism. appreciate that

Basket of ETF contains foreigh ETFs as well, canada, germany, Japan, so it wont be all US equities. Then there are utilities, energy ETF.
Also market exposure is around 31%, and its very rare(need to quantify that) that all four positions are open at the same time so its not full margin all the time. There is a time stop of 20 days as well.

I think I will consider a 10-15% stop to protect against any catastropic even, need to spend time on that...

 

You are right, There is 5% chance of me getting an ulcer
Ulcer index is around5

any more ideas?

 

>> “Using a $5 commission per trades decreases annual performance in back-test by 0.7%. System used closing price for trade, IMO doing a scan few mins before market close will even out the effect of slippage for popular ETFs.”

Famous last words.

For myself I would never trust a backtest that doesn’t include commission and slippage. I recommend that your rerun you backtest with actual commission and realistic slippage. I assume that amibroker will allow you do this. The reason that I think this needs to be done is that it appears that you are compounding you returns, and using commissions and slippage may dramatic alter your performance.

Additionally, you’re assuming that you will get exactly the closing price on every trade. In reality the closing price is only one trade and the odds are it wouldn’t be yours. I recommend that you look at the volatility near the close.

 

Wolf,

Thanks for the ideas..
I have run back-test with $5 commision(realistic for my account) and that reduced annual performance by 0.7% with no chage in drawdown.
There are only 45 trades on average in a year.

Also, doing the volatility analysis of the last few mins seems interesting.

If you are developing a system that trades 45 times in year in total, how much slippage would u expect in QQQQ(most liquid in my basket) and EWU(least lliquid) in the last few mins?
Cheers