September 2021
MOC Long 1 0.96%
I’ve been a bit conflicted for a few months on what to do next. My original plan for the MOC system was to develop and launch a long system with 20 x 10% positions which I have done and run since launch in early april. I had always planned to then develop and launch a short MOC and run 20 x 10% on the same capital to maximise the full leverage and to be equally exposed in both directions.
I have developed a short system I am happy with in testing but have held back from launching it. I had a call with Nick a couple of months ago which I had really just intended to be a final sense check before launching the short MOC. However, he talked about how the short side is very different to the long side, which echoes what I have read in a number of other people’s posts on the forum. Primarily that you are much more likely to get divergent results in live trading from the backtest results owing to short orders not getting filled as reliably.
I also noticed that my system only got ‘respectable’ looking results when testing on the full R3000 and when restricted to only R1000 the results are significantly worse, even with the stretch reduced to bring the exposure back up. What I believe Nick said was that your system will do most of its trades in the R1000 as the liquidity is greater there than in the remaining 2000 that make up the rest of the R3000.
Part of me says – “so what if the short system looks a bit weak and will probably underperform the backtest? – it’s ‘free’ leverage you might as well use it…” However that just feels like a cop-out and ‘disrespectful’ to the whole enterprise and all the hardwork and scrutiny that’s gone in thus far.
Therefore I went back and started looking again at my long system’s leverage/position sizing. I have decided to increase from 20 x 10% to 30 x 10% as I am happy with the backtested metrics and daily returns. Having now had the best part of 6 months of live trading, I feel comfortable enough with the resulting increased volatility. I can’t quite muster the balls to go to 40 x 10% so I think this is where i will draw the line for exposure in any one direction.
I now plan to try to find a short system that looks half decent at 10 x 10% on the R1000 and launch it alongside the long, thus utilising the full 400%. In terms of defining ‘decent’ I think if I can find something with a CAR of around 10% and a MaxDD of around -10% I will be happy with that and let the majority of the returns come from the long side.
Then put $2 in the deposit column…….”