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August 19, 2021 at 2:20 am #102093
JulianCohen
ParticipantI am tinkering, as I am want to do on occasion.
I have a portfolio of short systems, some MR and some MOC, all working on various different universes. If I change the MR systems to MOC then I get some changes to the overall metrics as you would expect, but not enough in general to change the portfolio outcome, once you account for a small randomness in the backtest. I mean the CAGR stays pretty much the same, the MDD changes maybe by 2% max, so overall I don’t see a massive difference.
The individual MR strategies when run as MR generally have a Win% or around 57% and the Average Win is less than the average Loss…which is expected.
However if I change them to MOC the Win% stays the same at 57% but the Average win is now greater than the average loss.
Nothing else is changed, just the holding period for the strategy. Each strategy has a different entry algorithm.
Expectancy over the last seven years is 29% or 30% with both structures.
So I’m trying to work out under these circumstances which is the “better” portfolio, and by better I am thinking of robustness over a period of time.
The one where the AveWin is always better than the AveLoss and has less inherent risk from not having any holding period, or the one that allows some diversification by allowing some strategies to hold for longer than others.
It might be a little esoteric but I think it’s a good avenue for discussion, and I’d appreciate some thoughts.
Of course the other thing that has just occurred to me is that maybe the algorithms I am using are just much better suited to MOC than MR and that’s why the avgWin vs avgLoss metrics change around so much.
August 19, 2021 at 4:44 am #113742Nick Radge
KeymasterExposure.
Same return for less exposure is always the better deal.
August 19, 2021 at 7:11 am #113743ParticipantYes that is what I was thinking….It’s really hard for me to write strategies that perform better as MR than they do as MOC…
September 1, 2021 at 3:00 pm #113744TimothyStrickland
MemberGood topic Julian.
Agree with Nick that I think that is a great goal to have. Make the most returns with the least exposure as possible. I think initially when I tried to build systems, I was trying to get the performance of my short term systems as high as my long term systems. I soon figured out that this wasn’t really possible (maybe in theory), but over many tests I saw the same trend. The less exposure time, typically the worse the results, at least in terms of CAGR. I think the reason why the MOC can match the MRV is the x4 leverage right? I don’t think I was able to get a MOC to perform the same as an MRV using the same amount of leverage. This is one reason the MOC is so attractive. I would like to do more testing in this arena but just haven’t had a lot of extra time recently to do so.
September 2, 2021 at 12:02 am #113798ParticipantYes I agree Tim…it’s the leverage that makes the MOC so powerful.
September 2, 2021 at 7:34 am #113811TerryDunne
ParticipantI know that in a slightly different context people didn’t like this idea, but you can leverage MR systems 4:1 if that’s the difference, so long as you have some MOC system as well. At the end of the day, the MOCs will be closed and your overnight leverage will be under the limit. There is some maths to do here, but not very much.
I don’t actually think that this is what makes the difference with MOC, in my view it’s the fact that you’re out of the position in a few hours, so no overnight gaps etc.
September 2, 2021 at 12:17 pm #113818MemberTerry, I think they both matter. The leverage AND the fact that you are only in the trade during the day and perhaps the way the market reacts during the day as well. I’d be curious to know what context you are referring to, as leveraging an MR system isn’t possible in the US, unless it was during the day only but then it wouldn’t be an MR system. There is a way to trade tick by tick but Nick doesn’t teach that and that requires a ton more coding. For the record I do plan on learning that at some point so I can potentially trade other asset classes like Forex.
The same concept applies in a long term system, I have done lots of testing and if you are able to leverage a rotational system, the returns are extremely attractive, but the drawdowns can be quite intense.
September 2, 2021 at 1:20 pm #113821LEONARDZIR
ParticipantI may be wrong about this but it seems to me you could probably keep an MR system and MOC at 4:1 in the same account if you also trade short systems in the same account. The short systems would balance out the longs. You have to figure appropriate position sizes.
September 2, 2021 at 9:21 pm #113823MemberLen, that is the first I have heard of that. However, it certainly might be worth looking into. Might be more work then its worth though if it is a constant balancing act. Perhaps you could just build it into both systems? Not sure.
September 2, 2021 at 10:43 pm #113827ParticipantI have my Aussie long term positions in the same account as my US MOC and MR systems. That way I can use the funds in the account that are held as stocks to contribute towards the leverage in the MOC and MR…however I am not using the whole amount by any means…it is just there so that I don’t get margin calls on the short term system if they are ever fully utilised.
September 7, 2021 at 12:31 pm #113828MemberJulian,
Are you using different brokers for your other systems? I have multiple brokers to hedge broker risk. I used to use FXCM for some forex trading years ago but then they got caught trading against their clients and were banned in the US.
September 8, 2021 at 12:02 am #113854ParticipantYes Tim, I use IB for my ASX trend following systems and US MOC and MR systems, and TD Ameritrade for the long term US systems.
I also split the portfolio due to ‘broker risk’….I got involved with the MF Global bullshit a few years ago so now when anyone tells me IB is too big to fail, sadly I know better
September 8, 2021 at 2:15 am #113858KateMoloney
ParticipantJulian, would you mind sharing your experience with MF global?
September 8, 2021 at 2:59 am #113860ParticipantI held a futures account with them. The accounts were supposed, by law, to be segregated; in other words they were holding the account on your behalf and couldn’t touch your funds, but the CEO at the time decided to override that and used customers funds to trade with. It all went south and the company went into bankruptcy. It took four years for my funds to be released and even then I didn’t get all of them back.
He didn’t go to prison of course.
I don’t want to sound like a conspiracy theorist but you really can’t trust anyone, no matter what they say, or what the law says they can or cannot do.
No matter what you read about it on the internet, the account holders were not made whole and the funds were held up for years while they wrangled through the courts.
September 8, 2021 at 5:09 am #113861ParticipantThank you for sharing.
What an interesting experience. The worst part would have been waiting for years to recover what was left of your funds.
Were there any warning signs that the company was in trouble?
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