Friday, 19 January 2018

How to Best Manage your Trading Systems’ Portfolio

All over the globe there are different trading systems and these are developed in such a way that they can tackle all kinds of conditions in the market. Actually for low volatility markets phases there is no appropriate setting. In case this is a possibility then the issue at hand would be to identify these phases. In practice it is good to have a portfolio with maximum diversification for that you need to combine the different strategies that show good performance in the calm markets with the others that also perform in a better manner in a high volatile period. If the strategy is built properly it should resist in all the phases with facing no much loss.

You can use an excel sheet or a proprietary software to take a detail analysis of the best mix that will help beat the markets.

A discretionary trader can apply in theory the portfolio management but in practice it may be a little difficult without one having an objective data. And if you trade discretionally it may be harder to diversify a portfolio. There are several mechanical ways to stop a strategy that does not perform as it should. It is best to know when a trading strategy should not be stopped may not exist but you should use your common sense to have a rule so that you can make a decision instead of using your gut feeling.

You can have minimum of 2 trading strategies but there is no limit for the maximum number. It solely depends on the amount you can have at your disposal. In theory one may think that with maximum diversification it is possible to have a portfolio that will not lose money but in theory it is not possible. But one must try not to lose much at a time.

You can use an approach based on the start and stop of a trading strategy that is based on the equity line. This is the mostly used method. You can also use different trading strategies that are based on different logics on one instrument. This is the best procedure. However you should not get confused with the correct amounts of the contracts to be placed on the broker’s side.

It is preferable to take into account the peculiarities of each market and then build a strategy that will take this into consideration. You can use different instruments to trade but the rules to create a trading system portfolio is the same? To build an effective portfolio it is best to use many markets and instruments.

You can have different combinations of trading systems but which one has to be used should be decided case by case. Anyway the more instruments you have it is better.

To manage a trading system portfolio you can start with a small amount but to have a living on it you should use a huge amount to trade only then you can get some profit out of it. If any trading system loses money it is better to trash it. Considering this trading system portfolio as a team sport you will trade better. And you can rank the systems performance to know which are working best for you. You should correlate trading system between themselves but not between markets.

Working on these for about 5-6 years you can get an idea and also know the risks and earn a huge amount too.

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