Re: Money management inside TS

[Mark Johnson <janitor@xxxxxxxxxxxx>]

At Wed, 28 Nov 2001 18:58:11, Robert Linders wrote:
  >
  > I am working on money management that is "integrated"
  > into TS.  Through a sort of push-op interface all buy/sell
  > signals are fed into a global databank.
  >

Depending on how ambitious the project becomes, you might
consider putting some or all of these kinds of features in:

(1) The ability to cancel an entry signal (i.e. not take a trade)
    based on portfolio-level statistics.  For example,

      A.  If(this signal is in Wheat) AND
          (I already have 5 or more positions in the Grains complex)
          THEN don't take this signal.

      B.  If(my total allowable Portfolio Heat is 40%) AND
          (taking this signal would push my total Portfolio Heat above 40%)
          THEN don't take this signal

      C.  If(this signal says to go short) AND
          (of my current positions, the ratio (#short_posns/#long_posns) > 0.66)
          THEN don't take this signal

      D.  If(this signal says to go long) AND (the ratio of
          (total_risk_in_long_posns / total_allowed_portfolio_heat) > 0.75)
          THEN don't take this signal

      E.  If(this signal is in Coffee) AND
          (3 or more of the trading systems I'm trading in my portfolio
          already have a position in Coffee) THEN don't take this signal


(2) The ability to add onto an existing position many days after the
    entry date, based on portfolio-level statistics.  Examples:

      F.  If(this trade has 3*ATR of open profit) AND
          (my trailing stoploss has moved beyond the breakeven point)
          AND (portfolio-level equity drawdown is less than 15%
          below the all-time equity high) THEN add more
          contracts to increase the positionsize by 50%.

      G.  If(portfolio-level equity has increased by 10% or more
          since I initiated this trade) AND (this trade has
          2 or more standard deviations of profit) AND
          (ADX is >0.30 and rising) THEN add more contracts to
          increase positionsize by 33%.


(3) The ability to exit a trade for betsizing reasons,
    without receiving an actual exit signal.  For example:

      H.  If(I only allow myself to have, at most, ten open positions) AND
          (I already have ten open positions) AND
          (I received a new entry signal) AND
          (I have sorted my existing positions based on the # of ATR's of
           open profits) AND (among my ten open positions, Copper
           is the worst, i.e. has the lowest # ATR's of open profit)
          THEN exit my Copper position, and simultaneously take a new
          position according to my new entry signal.


(4) The ability to refer to the entire equity history (i.e. the
    day-by-day "equity curve"), from the beginning of time right
    up to today, rather than just making today's equity value
    available.  This is necessary, for example, if you are going to
    implement Ryan Jones's "Rate of Decrease" betsizing algorithm
    from his book "The Trading Game".

--

   Mark Johnson     Silicon Valley, California     mark@xxxxxxxxxxxx

   "... The world will little note, nor long remember, what we
    say here..."   -Abraham Lincoln, "The Gettysburg Address"