Following this interesting discussion. Insufficient margin is the stuff that would keep me up at night. One thing that I didn’t quite follow is the bit about an override parameter ‘to avoid having to change instrument weights’. In your system GAT, I thought you only changed instrument weights annually? Probably have crossed wires on this...
No basically position = natural position (which is a function of instrument weight, amongst other things) x override factor (between 0 and 1, normally 1). So if for some reason I have to cut the risk on an instrument I just change the override. You're correct in saying that I haven't touched my instrument weights for years; I only adjust them if I have to permanently stop trading an instrument (last example was Aussie bonds, because they changed the data fee). GAT
It did indeed keep me awake the first times IB sent me those warning messages as I was afraid how they were going to mess up my account. I didn't know whether they would modify any position, and if so, which position they would select. But when you've been a few times in this situation it becomes more normal and doesn't affect the number of hours of sleep you get any longer.
I'm using the IB nomenclature here: Cash Balance divided by Net Liquidation is 27.6%. That seems about right to me as I hold about 70% of the account value in ETF stock.
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Hi GAT, quick question: I assume on your backtests you didn't worry about any timing mismatches between historic daily data on currency settlement prices and instrument futures closing prices (for position sizing for example)?