Portfolio Optimisation/Rebalancing of systems

The second largest issue after the strategy itself, at least for myself, is to decide which systems to run and not in your portfolio.

The subject is important and thought it could deserve its own thread, if admin thinks differently, just move it.

I think we all have the same situation, after some time you are sitting on a quite large library of strategies for each market, and then you are running them on a portfolio.

BUT, what decides which systems to run, how often to rebalance them and what are the defined rules for doing this ?

Myself i am right now picking top x systems per market looking at top NP/DD every 2 years, which would mean around 100 trades before rebalancing.

And would also exchange any systems at any time of the X systems above if it surpasses the largest DD it has had in the past.


What is yours preferred choices? comments on my approach is greatly appreciated.

Its an interesting subject for us all i believe.

Cheers

Thanks for feedback, appreciate that...so as i understand you are letting PA decide, but based on exactly what criteria, ?

You rebalance, when you have a better system to ad, or when one to kill..
Do you have a rule set for this?

- How do exactly define a "better" system ?
- how do exactly define when a system is going to the grave and you "kill" it ?
Sorry for being annoying

Yes best thing i believe would be to run one strategy per contract as you say, however in the long run from an operational perspective, i believe for myself that it would create issues, since i would prefer to run one strategy per sub account on same market in order to avoid risks such as stratgeies going long when another are short, and you end up with the stops in place but no position.. (Have actually happened to me), after that i want to rule out that operational risk. So in the long run and you want to run above 10 contracts on a single market, that would for me require 10 subaccounts or more...

Problem would be solved though if one would run long and short separately, but not doing that.


Much smarter people than myself in this business are suggesting that in this case, they would prefer to run ALL strategies, and just max positions that you cant have at one time.. however not liking this due risks of lots of losses and reduced profitable signals, due to clustering.. and difficulty comparing backtests with reality due to not taking all the signals from a single strategy.


Thoughts appreciated

Quote: Originally posted by Daniel UK1

In a perfect world i would like to see a single strategy, as a component in a trading system for one symbol, like an ensemble system.. meaning that each single strategy votes to go long or short, and according to a set rule, acts upon it... and then each single strategy matters less of the outcome result.. but this is a quite complex subject and not perhaps a straight solution to be subject of this thread.. But something i work on in my own research. Right now, i rebalance my strategies 1-2 times per year, sorted on NP/DD.. How do you do?

I just want to add that this checkbox has always worked for me, that several automated strategies in Tradestation can go both long and short at the same time in the same instrument with no issues. The net result is always correct in the end, it just looks different during the trades since the position is net 0 and that is a good thing for the margin instead of having separate sub-accounts. That is just more headache i think with several accounts.

Quote: Originally posted by SwedenTrader

I just want to add that this checkbox has always worked for me, that several automated strategies in Tradestation can go both long and short at the same time in the same instrument with no issues. The net result is always correct in the end, it just looks different during the trades since the position is net 0 and that is a good thing for the margin instead of having separate sub-accounts. That is just more headache i think with several accounts.

Quote: Originally posted by Carl

Wanted to share this 34 minute video about portfolio construction by Andrea Unger. IMHO the first 27 minutes are interesting. https://ps.ungeracademy.com/titan The video is an introduction to Andrea's course and introducing his Titan software.