Software for Contract Sizing in a portfolio

Discussion in 'Trading Software' started by trillenium, Jun 29, 2007.

  1. I am looking for a software that helps me determining the contract sizes for each trading system in a whole portfolio. Lets suppose I have 1 Mio and devide that up into 3 trading systems. then i start an e.g. optimal F approach for each system and want to see how it affects the whole portfolio. Is there a software out there that lets me load my PL data from my three systems and then calculates the overall impact of applying a money managemt method.
     
  2. Take a look at . Seer can backtest multiple systems as part of the same portfolio. You can use the optimizer to specify which money management variables you want to optimize and then output the optmization into excel for further analysis. If your particular money management methods are not specified you can define your own.
    They have a 30 day free trial if want to check it out.
     
  3. advise avoiding optimal f. Thy Bob Spears, fixed fractional & possibly fixed ratio...
     
  4. Advise using none of the above. Using backtested results
    to determine any quasi-Kelly fraction is a recipe for disaster.
    Ralph Vince has neither mathematical training nor aptitude
    and Ryan Jones is a complete swindle. Avoid them like the
    plague.

    Start trading with a constant rebalanced portfolio where the
    proportion in each system + the risk free asset (cash) is 1/n.
    If you have three systems plus cash that is 25% initial allocation
    to each.

    This allocation can be made to converge exponentially towards
    the optimal rebalanced portfolio by updating the weight vector
    proportionately with a ratio of two integrals. In practice the
    integrals are replaced by summations over a reasonably fine
    grid over the n-1 hyperplane.

    The procedure is given in Cover, 1991, and (revised) 1996.
    Complete with detailed examples.

    This is an online algorithm meaning it uses no past curve-
    fitted data to achieve its results. It is orders of magnitude
    safer than the suggestions above.

    Good luck.
     
  5. Could you tell me where I can read more about this ?

    I agree with you about the rest . And believe me or not - I design my systems and try to not change contract sizes at all during the year and then rebalance again at the beginning of the year depending on wether i lost or made during the year.
    My experience is that my trading systems hardly fail completely. They rather go sideways and break even. When that happens then it would be bad to constantly increase contract sizes when i win and decrease contract sizes when i lose. Of course I decrease when i lose like 20 %-30 % of the capital. But then try to stay with that. I dont increase contract sizes when i win ever.

    However I am open to new suggestions. And maybe its good to use some method that everybody else seems to use. And then re-balance to original contract sizes every end of the month / quarter/ year. I just want to test it.

    May i ask if you have already programmed your version of contract sizing ? What platform do you use ?
     
  6. Murray Ruggiero

    Murray Ruggiero ET Sponsor

    If you want to program money management strategies across multiple systems including things like rebalancing, limiting exposer by sectors you should take a look at TradersStudio. TradersStudio comes with several built in Money Management strategies such as percent margined as well as percent risk. You can program any money management strategy you can dream of with only a few lines of code.

    In addition you can migrate existing TradeStation systems to TradersStudio and then apply the money management.

    www.TradersStudio.com.