I am trying to implement dynamic ratio hedges of indices spread against another spread. i.e. hedging S1 with S2 let spread ratio chart NQ/ES be S1 let spread ratio chart YM/ER2 be S2 I was wondering if you could give me some pointers on how to go about analysing and perform dynamic rebalancing of S1/S2 oscillation chart as market goes up or down? For example, when NQ crosses ES from below on 1 hr chart, Long 2NQ, Short 1 ES hedged against (initate only when NQ crosses ES from above on 30mins chart) Short 3 YM, long 1 Er2 : Where can I find resources to optimise S1/S2/S3/... concepts?
Sounds like you feel the Nasdaq and Dow will perform similarly, while the S&P and the Small Caps will perform similarly when the market is adverse to the Nazz and Dow. You will implement each of these strategies on different time frames -- the 2nd strategy actually a SUB-strategy of the first. Either you can set up 2 spread charts and track both of these at the same time, seeing what they actually do and do some paper-trading for a few weeks on this -- OR, you can BACKTEST this. Since this type of compound trade will act as a "portfolio" for purposes of backtesting, my first suggestion is to use Amibroker for this purpose. There are others here in ET that have other very good ideas for backtesting software, so look around. However, whoever suggests any type of software MUST REMEMBER that you are dealing with trades on Stock INDEX FUTURES, and NOT on Stocks. Some will suggest software that does GREAT backtesting on STOCKS, but this software WILL NOT BE CAPABLE of PROPERLY backtesting the type of trades you are interested in. So, look carefully! --- Mike Collier Oak Harbor, WA
I analyze spreads the same way I analyze other price series. (1) I calculate the spread history. (2) I test the spread history with trading software, simulating different trading methods and risk levels.
How would you analyse a portfolio of winning and losing instruments? Can some sort of standard deviation based on volatility or similar concepts be applied to dynamic ratio rebalancing of long/short positions for portforlio/basket management: http://www.elitetrader.com/vb/showthread.php?threadid=109390