No. of Positions with rotational strategies

[Anonymous]

Hey everyone,

I just have a question for Craig or those working on a rotational strategy.

I am currently testing using Fixed % of equity position sizing with 10 max positions, and starting equity at $100K. No commissions.

When I run my system, the first month it buys 10 stocks all around $9980 in size, which makes sense.

At the end of the first month, 3 stocks are sold, yet only 2 new are bought, taking total holdings to 9 stocks, and leaving around $7700 in cash. I would have thought that if 3 stocks were sold, then 3 new ones would be bought.

Looking at the equity chart, it appears a residual cash balance of around 6-8% of total portfolio value is always present.

Any ideas?

Thanks

Oliver

[Stephen James]

Is the residual balance enough for a full position at that time?

[Stephen James]

This may help:-

Setoption(AllowPositionShrinking,True);

or select the setting in the Analyser General tab.

Either will allow partial positions

[Anonymous]

Hi Craig, thanks

I changed AllowPositionShrinking to True, and following the first month, 3 sells occur, and now 3 new buys occur. It must fill the top criteria stocks first at full size and then the last as a partial fill as the size of the 3 new buys are $11,195, $11,192 and then $7,755.

I guess in real time, I would be more likely to split the proceeds of the 3 sells into 3 equal portions for the new buys. Not sure if that can be coded?

Regards

Oliver

[Stephen James]

Not that I’m aware of Oilver

[Anonymous]

Ok no worries,

thanks Craig.

[SaidBitar]

OGordon wrote:

I changed AllowPositionShrinking to True, and following the first month, 3 sells occur, and now 3 new buys occur. It must fill the top criteria stocks first at full size and then the last as a partial fill as the size of the 3 new buys are $11,195, $11,192 and then $7,755.

I guess in real time, I would be more likely to split the proceeds of the 3 sells into 3 equal portions for the new buys. Not sure if that can be coded?

the first two positions should be equal size more or less and this is totally controlled by the position sizing criteria, but the last one is smaller because the remaining cash is less.

this is why you have 11,192 and 11,195 and the remaining cash is around 7755 so you bought shares with this amount.

you can not split the money into three equal parts by code and even in reality I believe you need to follow your position sizing that you backtested with other wise you are deviating from your plan

[SaidBitar]

OGordon wrote:

I am currently testing using Fixed % of equity position sizing with 10 max positions, and starting equity at $100K. No commissions.

Just wanted to add one comment based on some tests that i made. In the beginning i was using similar position sizing 10/10% and 20/5% then i used the position size that is based on volatility and risk the same that is described in “Stocks on the Move”. I found out that it is much better at least for this type of systems to use such position sizing. Again this is my observation you can test and compare the results.

here are the comparison from my side:
[ul]
[li]lower draw downs[/li]
[li]higher CAR[/li]
[li]less number of trades[/li]
[li]smoother equity curve[/li]
[/ul]

It would be interesting to test the same position sizing on other Trend following systems

[Anonymous]

Morning Said,

I have taken an initial look at Risk Parity position sizing. Based on my initial sample of data, it does indeed lower max draw down, however at the expense of lower CAR%.

I have attached the results so you can see. To date, i have tried 10 @ 10% and 20 @ 5%, as well as using risk factors of 0.2 and 0.15, in an attempt to get similar trade numbers.

It is probably something that I will revisit after I work on other aspect of my system.

Regards

Oliver

[Nick Radge]

10 positions at 10% is quite an aggressive stance and is why it yields the highest profit factor. However, allocating 10% to ANZ vs 10% is XYZ Dog are two very different animals and should be accounted for, especially when there are very volatile stocks in the mix, as there would be trading in the ASX

Quote:

Based on my initial sample of data, it does indeed lower max draw down, however at the expense of lower CAR%

There is always some type of payoff to every system adjustment you make.

Therefore, you need to ascertain what your objective function is, i.e. higher return or lower drawdown

[SaidBitar]

1- Try using 0.1 instead of 0.2 and 0.15
2- Try using OI instead of C in the position sizing

Code:

SetPositionSize( OI * PortfRisk /ATR(20), spsPercentOfEquity);

The reason i am using OI not C is that if I was taking the trade at that date i will be using the C that is OI now. this will give exactly same percentage allocation to the trade the difference will be in the cost of the trade will be different since the entry is based on the open but still profits and losses will be exactly same as they would have been.

[Anonymous]

Hi Said,

Just confirming, you are referencing open interest? which is adjusted close?

[SaidBitar]

Yes

[RobGiles]

HI Oliver / Said

I’ve just started exploring rotational systems. Interested to know where you settled on position sizing…fixed % or risk adjusted?

[SaidBitar]

I use risk adjusted

[Author]

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