Small stops, large size VS. large stops, small size?

Current volatility of an asset > stop size X order size = max risk.

 

Interesting concept.

What do you consider ‘large’? 40, 80, 200?

 

Somewhere around 200 positions. Positions need to be low or negatively correlated. Overall portfolio should be somewhat market neutral.

 

Probably better off to buy an Index ETF.

 

So basically any alpha you generate is by adding/culling individuals in that 200 to make it worth the effort over just buying an index?

Have you been able to build some history of staying ahead of the index?
Cheers!
T

 

Its not really an index play, although it may sound like it.
It is simply a collection of short term systems (mostly intraday) that each try to pick up on different market anomalies. Some are long only systems, some are short only, and some long/short. I set the allocation to each system with an eye on keeping the overall portfolio reasonably hedged.

 

I sensed there was something more interesting under the hood.

It sounds like you are channeling Laurens Bensdorp's system of systems approach only taking it a step further with a market neutrality process on the uptake and infinitesimally small single stock risk as a kicker. I have recently been studying Laurens 6 system 'system' that purports to see a max of 10% draw down all in. Definitely a next level challenge. Kudos!

What backtesting software do you prefer?

 

Day Trading 202: Tight Stops? Wide Stops? Which One Should I Use?


Entry Signals Are Very Important But Just As Important If Not More Is Trade Management.

By: Ilan Levy-Mayer, Cannon Trading Commodities Broker & VP


Today I decided to touch more on an educational feature rather than provide a certain market outlook. Many of my clients and blog readers know that when it comes to short term trading I am a fan of adjusting your trading technique/ game plan according to your assessment of the type of trading day that is developing in front of you.

Many new and advanced traders spend HOURS on looking for entry signals. Back testing historical data, creating algorithms to use and much more. I know. I am one of these traders.

Trade management consists of many factors. Some are psychological and some are more mathematical and many are in between. Some of the basic elements of trade management before even entering the trade are: What will my stop loss be**? will I use a stop loss**? What will my target be? will I use a target or just trail the trade if it goes my way?

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