How do you REBALANCE a portforlio of long/short Equities?

Discussion in 'Trading' started by virtualmoney, Jan 31, 2010.

  1. Say your strategy is to long the top 3 sectors and top 10 industries ETFs based on January's performance (Using Jan as whole year Barometer), and simultaneously short vice-versa, the bottom weakest sectors and industries.

    Do you rebalance your in MAY by closing the widest spread/ profitable component pairs and use profits to add in to the rest of the components of your portfolio?

    OR do not rebalance, simply leave it unchanged to NOV, where you shift your bias towards longs.

    OR how would you rebalance?:confused:
  2. spindr0


    I have no clue whether what I do has anything to do with what you're doing. Be that as it may...

    I trade pairs that can involve more than 2 stocks. If the spread narrows, I may close (taking the profit). If it widens, I may add more. If either side is profitable, I may book the profits and replace it with another (carrying the paper loss on the other side). I will also shift my bias intraday (more long than short or vice versa) getting back toward flat by the end of the day. The more intraday fluctuations there are, the merrier.

    Always book gains and carry paper losses rather than the reverse. That way, reversals are a good thing, not bad. :)
  3. Sounds do you determine what is your bias at different times? What is your criteria for stop-loss for components that have moved too much into negative?
  4. Another plan of my long-short portfolio is to long Nasdaq/tech(e.g, QQQQ etf/index futures) but short dow/DIA index between Nov-May, and do the vice-versa between May-Oct.

    Does anyone know any website/resources where there is statistics/historical performance of such indices seasonal pairs/spread strategies? :confused:
  5. spindr0


    If you stare at price and volume long enough, you can sense/determine the direction and shift your bias accordingly. However, there's no way to know for how long that direction will last and when it will reverse. The trick is to be nimble. I have Excel linked to my trading platform and the spreeadsheet does a lot of the heavy lifting.
  6. spindr0


    There are web sites that provide historical data. First one that comes to mind is Yahoo. Since that involves a bit of time, I subscribe to Reuters for historical data.

    Don't know if this will help you but it might be useful:
  7. what do you mean by rebalance?
    typically it means you adjust to your original % holdings
  8. That's correct, take partial profits by clearing some pairs components of widest spread within portfolio and use funds to add to the else would you do it?
  9. im not sure what you mean how else, if you do something else than its not porfolio rebalancing.

    you have some asset/stock allocation model and you rebalance to keep the same %s thats all there is to it.
  10. Thanks. So what are the top and weakest sectors and industries for Jan2010? i.e. ETFs
    #10     Feb 1, 2010