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Terry Dunne wrote:So, I imagine that running at 150% margin instead of 400% will lead to lower return. Does having short MOC in those circumstances mostly help with diversification?
Short answer yes and yes
I’m happy to take a lower return for less risk on the short systems. I don’t think running them at 400% would be prudent irrespective of what the backtest says.
I’m always looking for diversification in the systems so going short is fine. Yesterday I went long and short of MRNA at different prices and made money both ways.
That’s probably a one off haha but it can happen.
I think I can only justify short systems on the basis that they don’t need capital allocated to them. The plan would be to use the capital already allocated to the long MOC. I’m not sure if I’m explaining myself well – if I have some RSI based long system and I have the flip of that system as a short MOC system, I could use the same capital on the basis that I would rarely get both a long trade and a short trade and even if I did I would be unlikely to have many fills on that day.On that basis, any positive return is ‘free’. So risk/leverage can be turned a long way down and it’s all still good.
If that wasn’t the case then the short would have to have better metrics than at least one of my currently traded MOC systems…I haven’t been able to make that work yet.
Love the MRNA trades btw
Terry Dunne wrote:Sorry, I also meant to say that I hope June/July wasn’t too painful!It’s always painful…I’m Jewish…hate losing money
Terry Dunne wrote:
I think I can only justify short systems on the basis that they don’t need capital allocated to them. The plan would be to use the capital already allocated to the long MOC.Hey Terry. This is something that I have been really going through in my head back and forth – whether or not to overexpose on funds or not. I think we are on the same page; that is, assuming that you will not get fully filled in your long system and your short system EVER in real time, which means you should be able to, in theory, overexpose without any risk.
Certainly the above can’t be true – there is for sure a chance of you getting fully loaded on both, even if it has never happened in the past. Sounds like your RSI method provides some extra precaution – cool. That’s probably good.
Instead of overexposing on funds directly (using 100k long and 100k short on 100k balance), I’ve been thinking due to a bug Julian put in my ear, that it may be better to overexpose with submitted orders, which will indirectly overexpose you with regards to funds. Hear me out:
Say you have 100k balance, and you take 50k for a long system and 50k for a short system. You use 40 positions each and you do 10% on each position.
What if you submitted 60 orders each day for each system, and cancelled all remaining orders after 40 were filled? It’s extra super duper unlikely that the market would open in such a way to slam you on both sides, to fully load you on shorts and longs right after the open. You are introducing some selection bias, yes, but I think this is allowable as we are all using a ranking that, in theory, should give the higher ranked stocks a better positive expectancy.
I’ve written a lot here – let me know what you think. Would love some discussion on the subject. Cheers everyone!
Yeah sorry. I meant the Real Test section of this forum
https://edu.thechartist.com.au/kunena/real-test-software/698-rt-and-selection-bias.html
Hi Seth,
You’re suggestion – extra positions that don’t get filled once you’ve used up your capital – is where I first started out. I thought I was a trading genius!
Then I spoke to Nick who walked me through his experience of doing something similar…
December MOC/MR
MOC1000 MOC2000 MR2000 Total
5.38% 1.25% 3.06% 3.41%6 Months Since Launch
MOC1000 MOC2000 MR2000 Total
9.97% 9.60% 13.87% 12.52%
winners / losers 1.40 1.97 0.98 1.51
Winning % 67.19% 61.40% 61.85% 62.93%
MDD% (3.33%) (5.75%) (12.59%) (1.70%)Of course I feel a bit inferior compared to the other posters so far, but remind myself that the markets won’t always be this suitable and my systems are designed to produce consistent returns in a variety of conditions, including down trends.
I canned two live MOC systems in December and increased my allocation to the remaining six – I changed my key metric from Sharpe Ratio to the Ulcer Performance Index and two of my systems, which were marginal using SR, didn’t make it using the new criteria.
I’m finally ready to add three new systems from January – two short MOC systems and a rotational momentum system. The short MOCs will use only half the leverage of my long MOC systems – thanks for the suggestion Julian – and no capital, so any positive return will be additive. The momentum system will be about 10% of my portfolio. The new systems
Even after adding the new systems, I will still have about 10% of my capital unused, which is not how I want to roll. So my plan is to add one more trend following/momentum system, just as soon as I can find one I’m happy with.
Best wishes for the new year everyone!
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