Combining trading Systems

[SaidBitar]

Hi

I have been thinking recently about combining trading systems, mainly mean reversion ones into one system.
the reasons are the following:
[ol]
[li]Mean reversion systems that I use have low exposure average 23% of the time.So 77% of the time the system is in Cash[/li]
[li]Mean reversion systems have small profits and they depend on the trade frequency to grow the capital[/li]
[/ol]

So what i did i combined the two systems together. Due to the similar nature of the systems most of the signal align together but still there are some unique signals from each system.

the result was a slight increase in the exposure it became around 25% trade frequency increased by 25% to 30% which is good and total profit increased as well.

In theory this sounds good but the questions are:
[ol]
[li]Is it dangerous to combine two or even more systems in a single system for better results?[/li]
[li]the problem with combining systems into one at least the one that i noticed is that even if you prioritize one system over the other still the Amibroker backtest is working in a different way from what is in my mind. The reason is that Amibroker works by running the code on a single stock generating all the buy and sell signals, then moves to the second to generate the buy and sell signals and so on till all the watch list is finished. then start adding them together based on the signals which came first and position sizing. So the prioritizing is working only on stock level not on the system level[/li]
[/ol]

thanks

[Nick Radge]

Quote:

Is it dangerous to combine two or even more systems in a single system for better results?

If there is enough trade frequency in each system then there should be no real issues. The only time I have seen a disaster was when a guy I knew claimed he had a system when it turned out it was made up of 10 or so very random patterns that had been massively data mined. The combo looked good, but individually they were not robust. Needless to say he blew up his account.

The other issue you’ll have, which you’ve highlighted, is a heavy clustering of signals at certain times. I have been experimenting trading both the High Frequency and US Original strategies together whereby the HFT will trade all signals and the US Original will trade any residual signals not found in the HFT.

This may not be optimal.

Ideally you want two systems that don’t cluster

.

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