acrary, I have a question. The files you've been attaching as ".txt" files appear all garbled up and unreadable on my end. Any idea why? Thanks!
I don't know. Maybe the files aren't associated with notepad or wordpad. Try changing the .txt to something else and see what you get using notepad. Maybe a computer guru here will be nice enough to help.
Download them first. Then view them using notepad. Viewing them from within your browser will produce less than favorable results.
Glad that worked! Ok, with 4 average models I didn't achieve the goal. So of course I've got to add a fifth model. Just to make sure it achieves the goals I'm using one of my models that I trade. It's going to change the weights dramatically, but it should be interesting. It's probably going to take about 20 min. for the weighting program to do it's crunching.
Anybody that's wants their stuff tested, here's the email address. noobtrader-@-hotmail.com (lol) I put in dashes to prevent autobots from putting me on autospam (I've seen others do it so I'm guessing here). Remove the dashes to send stuff to me.
This is great stuff here. I'd wager though that the vast majority of people here are not in a position where they already have 4 or 5 profitable systems that they need to balance. I suspect that a more general introduction to building profitable systems in the first place would be much more valuable to most people here (myself included)
I wanted to show a complete process first. As soon as I complete the material I'll show you how to get the systems to plug in here. (You won't have to develop a thing, but it might cost you some bucks to buy the systems). I knew once I started on developing a single system I'd never get to this material (and this is way more important and generally unknown).
Acrary, First, thank you for doing this...very helpful to see simple examples done step by step. Could you confirm for me that I understand the position sizing element properly...here is my take: 1. Determine the optimal relative position weights for each model by calculating the combined maximum mod sharpe ratio. (I use solver or goal seek in excel) 2. Take the largest weighting and set it equal to 1. All the other models will have position sizes that are a fraction thereof. So for example, if the weightings for 3 different systems came out to be 5, 3, and 1 respectively-- I would use a 1 "unit" position size for system 1, .6 "unit" position size for system 2, and .2 for system 3. Assuming I was using 1% fixed percentage position sizing methodology, this would equate to 1% equity risked for each position put on for model 1, .6% equity risked for each position put on for model, and .2% for a position in model 3. Am I looking at this the right way? Thanks again, bjs
Here's the weight test for 5 models. Notice the modified sharpe ratio for model 5. Also notice how it boosts the overall sharpe ratio for the five systems dramatically. Now also notice how none of the 5 systems has a strong correlation. Even when taking into consideration the standard deviation none of them go above +.4. Notice on the weighting for the money management how model 5 becomes the basis for all others to weight against. This is what happens when you bring in a great system.