Hello, I'm running an automated long/short US stock trend following system with a typical trade holding time of about of .5 days to a week. Lately, I've been agonizing over whether I should temporarily disable the system. On the one hand, I feel that the extraordinary market conditions are not at all represented in the data on which I used to train the system. Further, due to the financial short selling ban, many more than usual of the system's short signals are not getting filled. On the other hand, even though it has been a very volatile month, I am up slightly. Greed keeps me hoping that the market cycles will line up with my system and I'll get great results. Is anybody else facing this problem? Has anyone turned their system off with the expectation that they will turn it back on when the markets return to "normal."
You should porbably know or be able to figure out what trades have the most risk relative to the others. When the market gets crazy like this you can disable riskiest trades and keep the system going.
Stay inside your designed trading range. We Autotrade ES futures... Our Trade sets are hedged to support 50 points of movement. Tradesets safety stop when the bots spread out beyond our trading range.. the hedge ratio is ineffective and stop the tradeset. You should not have a problem if you stay inside of your algo design.
I recommend disabling until things cool off. I am not an automated trader but the ones I network with are shutting it down until next week.
When faced with an agonizing decision under uncertainty, perhaps a good strategem is: "do half". Then you lock-in half of the best case outcome (and guarantee you only suffer half of the worst case outcome). You are proposing to add a new parameter alpha, into your trading system's position sizing equation: Code: Actual_position_size = alpha * System_calculated_position_size and you are restricting alpha to be either 0.00 ("disabled") or 1.00 ("enabled"). Why not let alpha be any number in the range [0 to 1], and in particular, why not let alpha = 0.50 ??
although I believe altering a system generally isn't good, I really have slowed down on my size of positions. The edge / volatility is way too small
I understand Jack Hershey is doing 3 times the range. Must be nice to capture 2800 Dow points in one day...