How do you round your positions from the backtest results?

Discussion in 'Strategy Development' started by mizhael, Mar 4, 2010.

  1. Hi all,

    Let's say you have 3 trading strategies, and you form a basket.

    The model gives you the "ideal" number of contracts at any given date.

    For example, say today, the model gives the following three real numbers for our positions on the 3 strategies:

    1.3 0.49 2.8

    Do you round each one and then add up or you round the net?

    There are two alternatives:

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    (1):

    Let's say I choose to round the net, and get round(1.3+0.49+2.8)=5.

    Maybe I should put this "round(net)" scheme into my backtest model so then my backtest Sharpe is based on this realistically tradable model.

    But then I will lose precise track of each individual strategy.

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    (2):

    Let's say I choose to round each one first, and then sum them up, and get round(1.3)+round(0.49)+round(2.8)=1+0+3=4.

    If I put this "round(s1)+round(s2)+round(s3)" scheme into my backtest model so then my backtest Sharpe is based on this realistically tradable model.

    Then I will have precise track of each individual strategy.

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    Which one is better?

    Thank you!