Changes to Live Trading system
Posted: Mon Mar 03, 2008 6:30 pm
I have a question that I have spent some time searching for an answer on this forum, but cant seem to lay my hands on it. I am sure I have seen a discussion on this topic before but for the life of me I cannot find it now....
I am looking for some advice on how to deal with changes to your live system. I have made some enhancements to my system and would like to start trading those enhancements. In this context I have a number of questions that I am wrestling with.
I think this appears to be a trade off between three philosophies:
1) merge one system into the other as best as possible on a trade by trade basis - use same start dates, on open trades use exits of 'new' system, use equity at original start date of 'old' system etc... this appears fraught with compromise
2) merge old and new by leaving the old system to trade itself out, while applying all closed capital as it becomes available to the new system
3) treat the 'old' system and 'new' systems as completely separate systems. Close the old system out and enter the new.
Questions I would have for each in turn is then:
1a) Current live trades : Do I keep my current ('old') system running until all trades on this system are closed out? This is slightly complicated when you can see that the 'old' system and the 'new' system would be holding positions in the same markets (albeit at different entry dates and/or position sizes). However if you know your 'new' system is a better performer, it is tempting to use the exits of the 'new' system? Does anyone have thoughts on this?
1b) When I start to trade the 'new' system, do I begin generating orders from the start date of the 'old' system or the date I commence with the 'new' system? This is related to the second point I make in 1a) above. Clearly if you think the exits of the 'new' system are better you are going to have to run it from the start date of the 'old' system to get the exit orders generated...
1c) Do you then take the orders on the 'new' system from the start date of the 'old' system going forward in 1b) above?
1d) From an equity pov would you use the starting equity of the 'old' system or the closed equity?
2) In this option you trade all current open trades until they were closed on the 'old' system and start your 'new' system from today. In this case do you then take all trades that are signaled, even if your 'old' system is still in those markets? This would appear to be doubling up on risk if you believe that part of the systems' strengths are market diversification. I presume the best equity model in this approach is to use only the closed equity of the 'old' system as equity for the 'new' system so as not to over-leverage?
3) This option is a clean break. Would you close out all positions on the 'old' system and then start trading with your equity afresh on the 'new' system taking signals as they come up? This appears to be the cleanest approach but seems to fly in the face of a LTTF system... especially if you know your 'new' system will just pick up many of the markets you are in but just with you having paid costs of entry and exit..
Mind blowing if you have multiple systems all changing and being improved over time... I would really appreciate some advice on this one and apologies is this appears a little unclear, it is late!
Many thanks
I am looking for some advice on how to deal with changes to your live system. I have made some enhancements to my system and would like to start trading those enhancements. In this context I have a number of questions that I am wrestling with.
I think this appears to be a trade off between three philosophies:
1) merge one system into the other as best as possible on a trade by trade basis - use same start dates, on open trades use exits of 'new' system, use equity at original start date of 'old' system etc... this appears fraught with compromise
2) merge old and new by leaving the old system to trade itself out, while applying all closed capital as it becomes available to the new system
3) treat the 'old' system and 'new' systems as completely separate systems. Close the old system out and enter the new.
Questions I would have for each in turn is then:
1a) Current live trades : Do I keep my current ('old') system running until all trades on this system are closed out? This is slightly complicated when you can see that the 'old' system and the 'new' system would be holding positions in the same markets (albeit at different entry dates and/or position sizes). However if you know your 'new' system is a better performer, it is tempting to use the exits of the 'new' system? Does anyone have thoughts on this?
1b) When I start to trade the 'new' system, do I begin generating orders from the start date of the 'old' system or the date I commence with the 'new' system? This is related to the second point I make in 1a) above. Clearly if you think the exits of the 'new' system are better you are going to have to run it from the start date of the 'old' system to get the exit orders generated...
1c) Do you then take the orders on the 'new' system from the start date of the 'old' system going forward in 1b) above?
1d) From an equity pov would you use the starting equity of the 'old' system or the closed equity?
2) In this option you trade all current open trades until they were closed on the 'old' system and start your 'new' system from today. In this case do you then take all trades that are signaled, even if your 'old' system is still in those markets? This would appear to be doubling up on risk if you believe that part of the systems' strengths are market diversification. I presume the best equity model in this approach is to use only the closed equity of the 'old' system as equity for the 'new' system so as not to over-leverage?
3) This option is a clean break. Would you close out all positions on the 'old' system and then start trading with your equity afresh on the 'new' system taking signals as they come up? This appears to be the cleanest approach but seems to fly in the face of a LTTF system... especially if you know your 'new' system will just pick up many of the markets you are in but just with you having paid costs of entry and exit..
Mind blowing if you have multiple systems all changing and being improved over time... I would really appreciate some advice on this one and apologies is this appears a little unclear, it is late!
Many thanks