I guess. I was just giving a general idea For example, if I was a vol seller via put or call spreads, thats where this method would really shine - in fact, I'd recon that despite the higher costs due to split executions it would be still worth it.
Thanks for the reply! To be clear, my plan is to keep the 80K in the bank account and withdraw 1000 every month as long as there are funds in the account. I don`t plan on investing the 80K in anything riskier than a deposit/savings account. And of course when I make losses on the futures trading, the amount in the bank account would be used to meet margin calls. For a strategy with a given Sharpe and skewness, it seems to me one of the biggest decisions is what risk to target. The reasons referred to so far mostly have to do with how much losses one can take mentally before losing sleep. In the Systematic Trading book you do refer to the Kelly rule, but indeed the vol target suggested by the Kelly rule is too spicy for me. Thus it becomes a trade-off between having the optimal target according to Kelly and being able to sleep well, which is very qualitative and subjective decision in the end...
Hi Rob, I am building an integration of pysystemtrade and IB (I know, I know, you are building it too... but I didn't have the patience). I am making some tests, and the only data that IB provides free of charge is Forex data. So, I have made some changes to the code in order to use it with Forex. Nevertheless, I got stuck in something apparently very simple but that is making my forecasts to look not very accurate: the block value. How would you calculate the block value for, let's say, USDJPY and EURGBP, taking a Standard Lot (100,000$) as the minimum amount you can invest? Thanks again!
The block value is the value of a 1% change in the value of a block. If you own $100K of USDJPY or EURGBP the block value is just $1K GAT
@globalarbtrader is there a preferred method for learning parameters in an online fashion, where a backtest isn’t possible?
What do you mean by 'online'? When you say 'learning' do you mean 'finding the optimal set of parameters according to some criteria'? GAT
Yes exactly, but where you can only use live trading to inform you of the parameters. I'm conscious of using a naive method that may overfit. I can handcraft a prior, but still need a reasonable posterior.
Identify a linear relationship between variables related to your trading Once you have that, then you need to calibrate the Kalman Filter It really depends on what problem you have formulated. For me I formulated my trading into a linear equation so I could use a KF.