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Swing Trade Portfolio


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Swing Trade Portfolio

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  #1 (permalink)
Atlanta GA
 
 
Posts: 21 since Dec 2010
Thanks: 7 given, 4 received

Hello, I am contemplating the implementation of this swing trading portfolio that on ES, NQ, LH, & CT. I am interested in two things; how would you capitalize this portfolio, in terms of dollars, and method i.e. 3X max DD, or 3X margin requirements ($20K was an arbitrary number), etc., and secondly, is there anything in the statistics that is alarming, or in the style of trading I may have overlooked? Walk forward historical results are from 2014 forward.

ES and NQ are completely uncorrelated, different entry/exit logic, one breakout and one retracement, the LH and CT are mean reversion. Each holds trades several days. ES and CT trade the overnight sessions as well. Stops are in the algo, but not sent to the market until triggered.

Obviously overnight risk, opening gaps, and lack of full market liquidity due to the overnight session are risks, but we're trading one contract on each market. I am alerted upon any platform failure or trade execution (Speedy Trading Servers, & TS version 9.5).

Slippage and commission for each market are accurate and included in the stats. These systems are optimized once/year on a walk forward basis. Time frames range from 30 minutes to 240 minutes.


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  #3 (permalink)
Atlanta GA
 
 
Posts: 21 since Dec 2010
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Okay, I will ask my questions a different way.

How do you look at capitalizing your accounts? What methods do you consider when applying capital to a portfolio of systems?

Are there any metrics in your historical analysis that you tend to focus on from a (1) risk management perspective (2) or allocating capital to your account?

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  #4 (permalink)
Atlanta GA
 
 
Posts: 21 since Dec 2010
Thanks: 7 given, 4 received

I will try to solicit a response a third way: do you consider your account leverage ratio? How much are you leveraged against your account balance. Not margin, but contract notional value.

Does anyone have a metric of a reasonable leverage ratio? I would think you want a ratio to be less than 10:1.

These numbers are NOT exactly representative of today's market prices, but for a conversational point;

Account Leverage Ratio: A $20K acct long 1 E-mini S&P is leveraged 8:1 ($165K notional value/$20K account value). If the account is long 5 contracts they are leveraged 40:1 ($825K/$20K). Is it a good general rule is to keep the account below 10:1 leverage even when you are the most bullish or bearish?

What is a good target number?

In my swing trade portfolio, depending on the combo of NQ, LH, CT, and ES I have a max loss with all contracts on of between 4% and 16%, again depending on the combination of contracts if all my positions fell apart at once.

Trading a swing portfolio - does anyone have a max loss target? I know it's risk and account balance based and highly personalized. Just trying to get a feel of what other might look at.

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  #5 (permalink)
Stockholm, Sweden
 
Experience: Intermediate
Trading: FDAX, ES
 
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Posts: 84 since Oct 2018
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dgresens View Post
I will try to solicit a response a third way: do you consider your account leverage ratio? How much are you leveraged against your account balance. Not margin, but contract notional value.

Does anyone have a metric of a reasonable leverage ratio? I would think you want a ratio to be less than 10:1.

These numbers are NOT exactly representative of today's market prices, but for a conversational point;

Account Leverage Ratio: A $20K acct long 1 E-mini S&P is leveraged 8:1 ($165K notional value/$20K account value). If the account is long 5 contracts they are leveraged 40:1 ($825K/$20K). Is it a good general rule is to keep the account below 10:1 leverage even when you are the most bullish or bearish?

What is a good target number?

In my swing trade portfolio, depending on the combo of NQ, LH, CT, and ES I have a max loss with all contracts on of between 4% and 16%, again depending on the combination of contracts if all my positions fell apart at once.

Trading a swing portfolio - does anyone have a max loss target? I know it's risk and account balance based and highly personalized. Just trying to get a feel of what other might look at.

Hey Dgresens, these are all very interesting questions and in my mind crucial, you are doing the right thing thinking about this and I will offer my 2c, mind you I don't develop trading systems, but you can look into what kevinkdog has written on this site by using the search function.

Now I don't know anything about your trading experience but to me a -4% and -16% loss sound like a bit to much, but what worries me more is the sharpe ratio of 0,1542. I guess it is based on the leverage factor of the contracts compared to margin? If not than I would think about trying to decrease volatility somehow, the notional value of 165k vs 20k is fine from a text book example but in the real world some people can handle the risk and others can't so you have to decide and figure out what is right for you.

For me personally I day and swing trade derivatives on the DAX, FESX and Spoo to hedge my core equity holding, so I might have a 70% core equity long exposure, put on my trades and get to 20% net long / -50% net short, notional exposure 120% (gross leverage, my max is 200%, never been that high). This does 2 things first it relieves the pressure of any one trade, secondly it improves my sharpe ratio by a lot if Im trading well.

Now this is the route I took after getting to know myself, I want to participate and grow my account slowly but still beat the overall market, basically my risk of blowing up is small (not 0%), the markets might crash but hopefully I will have been short some of the way. Also I can continue to grow by managing more of my money but also other peoples money, which is also a good way to decrease leverage if you can get some investors. So I keep track of my risk on a trade by trade basis and on a overall exposure basis, which I think is important for anyone trading more long term and with multiple positions on at the same time.

So I would figure out what your personal goals are, if I was to implement your system I would trade ETF's with a small amount of leverage until I reached a point where I could trade futures leveraged 3-1, but that is just me, you will not find people with a exposure of 20-1 swing trading (without offsetting that risk with some kind of spread in a different yet correlated market), some corporate credit or mortgage traders can be really leveraged but that usually doesn't end well, see Lehman brothers. Are you fine with losing 15% of your account? 30%? 50%?

To summarize, you really have to decide what type of risk level you are comfortable with, from experience I would say that going live it is usually a lot less than what we think. You seem to have a good grasp of the risk involved mentioning the opening gaps etc, so keeping in mind the notional value of your exposure overnight is a good way to do that. Like I said only you can decide for yourself but hopefully you gained something from my ramblings.

Velox

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