Allocation of the robots

[mingpan.lam]

Hi all,

Anyone can share how much their total investment portfolio will be allocated to the two robots if they subscribed. I am thinking about my allocation, so just want to have more opinion.

Also, any idea how to allocation among the two robots, is it half/half or in a ratio?

Thanks for your suggestion,

Ellis

[ericoleman]

Hi Ellis,

You many consider checking the following two threads for recent discussion of allocation ideas:

http://www.effectivevolume.com/showthread.php?3605-Suggested-IWM-GDX-Allocation-Levels&p=13836#post13836

http://www.effectivevolume.com/showthread.php?3585-Discretionary-trading/page3&highlight=discretionary+trading

Best,

Eric

[mingpan.lam]

Thanks Eric, it is very useful.

Also, I tried to follow the trade on this doc.

http://www.effectivevolume.eu/content/Reports/Trading_IWM.pdf
But the trade doesn't seem to match what I can find in yahoo finance for IWM.

For example.
The doc has
Shorted 7/25/2007 8/1/2007 77.42 74.37 3.94% 1.12%

I found in yahoo finance. On 25Jul, the OHLC is 81.46,81.77, 79.83, 80.70. Am I missing something?



Annex 1: Trades of the 20DMF applied to IWM
Average drawdown long trades: 6.22%
Average drawdown short trades: 3.41%
Start date End date Start Price End Price Profit/loss Drawdowns
Shorted 7/25/2007 8/1/2007 77.42 74.37 3.94% 1.12%
Bought 8/1/2007 11/1/2007 74.37 76.11 2.34% 5.71%
Shorted 11/1/2007 11/6/2007 76.11 76.9 -1.04% 2.64%
Shorted 11/7/2007 11/29/2007 74.52 73.29 1.65% 2.04%

[mingpan.lam]

Also for example, I found the following in Today's IWM robot

Magagement of an existing position
The 20DMF has been in BUY mode since the close of 6/9/2011.
The robot's current position is a BUY that took place on 6/10/2011.
The buy entry price was 78.39 and the current stop level is 79.59. Last close: 82.2

The entry price was 78.39 but here's the OHLC of IWM on 9,10 Jun

9Jun 79.08 79.71, 78.73 79.27
10Jun 78.78,78.91,77.65,78

So, is the buy signal given after close of 10Jun?
Hope someone can help me to clarify?

Cheers,

Ellis

[davidallison@gmail.com]

Also for example, I found the following in Today's IWM robot

Magagement of an existing position
The 20DMF has been in BUY mode since the close of 6/9/2011.
The robot's current position is a BUY that took place on 6/10/2011.
The buy entry price was 78.39 and the current stop level is 79.59. Last close: 82.2

The entry price was 78.39 but here's the OHLC of IWM on 9,10 Jun

9Jun 79.08 79.71, 78.73 79.27
10Jun 78.78,78.91,77.65,78

So, is the buy signal given after close of 10Jun?
Hope someone can help me to clarify?

Cheers,

Ellis

Ellis, The robot issued a buy for the 10th of June at a price of 78.39. This was filled later in the day on the 10th, as the price of IWM dropped to the entry level and was filled. The signal is valid after the close on the 9th, but was not published until a few hours before market open on the 10th. Hope this helps, Dave

[Billy]

Ellis, The robot issued a buy for the 10th of June at a price of 78.39. This was filled later in the day on the 10th, as the price of IWM dropped to the entry level and was filled. The signal is valid after the close on the 9th, but was not published until a few hours before market open on the 10th. Hope this helps, Dave

Thank you Dave, your comment is correct.
For the old (backtest) 2007 trades, I will check with Pascal or I'm sure he will jump in the thread.
About the allocations, they will be further detailed in the Algo & Multi pivot forum over time.
If you trade only IWM/RWM, then the optimal proportion of GDX is much higher than if you trade the double or triple-leveraged IWM related ETFs. However, note that the backtest period included the most volatile market in a decade and future results may differ much if we enter a period of stable volatility.
Pascal will post soon an enlighting robot drawdown study for GDX compared to IWM that demonstrates that non-leveraged and double-leveraged IWM trading should be combined with GDX trading for optimal portfolio risk-adjusted performance.

[Pascal]

Thank you Dave, your comment is correct.
For the old (backtest) 2007 trades, I will check with Pascal or I'm sure he will jump in the thread.
About the allocations, they will be further detailed in the Algo & Multi pivot forum over time.
If you trade only IWM/RWM, then the optimal proportion of GDX is much higher than if you trade the double or triple-leveraged IWM related ETFs. However, note that the backtest period included the most volatile market in a decade and future results may differ much if we enter a period of stable volatility.
Pascal will post soon an enlighting robot drawdown study for GDX compared to IWM that demonstrates that non-leveraged and double-leveraged IWM trading should be combined with GDX trading for optimal portfolio risk-adjusted performance.

Dave's explanations are correct.
Here is the link to the DD study that I finsihed this morning:

http://www.effectivevolume.eu/content/Reports/Robots_Drawdown_analysis.pdf


Pascal

[Pascal]

Thanks Eric, it is very useful.

Also, I tried to follow the trade on this doc.

http://www.effectivevolume.eu/content/Reports/Trading_IWM.pdf
But the trade doesn't seem to match what I can find in yahoo finance for IWM.

For example.
The doc has
Shorted 7/25/2007 8/1/2007 77.42 74.37 3.94% 1.12%

I found in yahoo finance. On 25Jul, the OHLC is 81.46,81.77, 79.83, 80.70. Am I missing something?



Annex 1: Trades of the 20DMF applied to IWM
Average drawdown long trades: 6.22%
Average drawdown short trades: 3.41%
Start date End date Start Price End Price Profit/loss Drawdowns
Shorted 7/25/2007 8/1/2007 77.42 74.37 3.94% 1.12%
Bought 8/1/2007 11/1/2007 74.37 76.11 2.34% 5.71%
Shorted 11/1/2007 11/6/2007 76.11 76.9 -1.04% 2.64%
Shorted 11/7/2007 11/29/2007 74.52 73.29 1.65% 2.04%

The difference is simply because on this test I used prices corrected for dividends, while you are looking at the prices non-corrected.


Pascal

[mingpan.lam]

Dave's explanations are correct.
Here is the link to the DD study that I finsihed this morning:

http://www.effectivevolume.eu/content/Reports/Robots_Drawdown_analysis.pdf


Pascal

Hi Pascal,

Thanks for the reply.
During 2008, both IWM and GDX have max draw down more than 25%. But IWM/GDX model has about 10% draw only, during that time. Why that will happen, I will expect it will be still 25% drawdown, I understand they have low correlation factor, but just based on the diagram, they are both making a 25% drawndown at 10/15/2008 but it is only 10% when they combined.

Also, any suggestion about free dividends adjusted data I can find. I just want to verify the trade myself and if I follow the robot, I can follow it correctly.

Cheers,

Ellis

[mingpan.lam]

Dave's explanations are correct.
Here is the link to the DD study that I finsihed this morning:

http://www.effectivevolume.eu/content/Reports/Robots_Drawdown_analysis.pdf


Pascal

Hi Pascal,

Can I assume the following? For example,

Shorted 7/25/2007 8/1/2007 77.42 74.37 3.94% 1.12%

Means, at 7/25/2007, put a short limited order at 77.42 before the market open and it should be filled, but do you have a protective stop loss order along with the first short limited order?
at 8/1/2007, closed at 74.37, it should be closed by a trailing stop, can I assume this stop is available before the market open?

Cheers,

Ellis

[Pascal]

Hi Pascal,

Thanks for the reply.
During 2008, both IWM and GDX have max draw down more than 25%. But IWM/GDX model has about 10% draw only, during that time. Why that will happen, I will expect it will be still 25% drawdown, I understand they have low correlation factor, but just based on the diagram, they are both making a 25% drawndown at 10/15/2008 but it is only 10% when they combined.

Also, any suggestion about free dividends adjusted data I can find. I just want to verify the trade myself and if I follow the robot, I can follow it correctly.

Cheers,

Ellis

It is because the diagram is not precise enough. Both IWM/GDX did not have their worst drawdowns at the same dates, but two weeks apart.

On Oct 8, 2008, the GDX DD was -28% and IWM was -3%
On Oct 23, 2008, the GDX DD was 0% and the IWM DD was -29%

During that period, IWM/GDX often had opposite direction signals.

The DD of the portfolio is of course not the average DD of each component.

Yahoo supplies the dividends corrected data.


Pascal

[Pascal]

Hi Pascal,

Can I assume the following? For example,

Shorted 7/25/2007 8/1/2007 77.42 74.37 3.94% 1.12%

Means, at 7/25/2007, put a short limited order at 77.42 before the market open and it should be filled, but do you have a protective stop loss order along with the first short limited order?
at 8/1/2007, closed at 74.37, it should be closed by a trailing stop, can I assume this stop is available before the market open?

Cheers,

Ellis

There is no stop loss on a market direction model simulation. Only on the Multi-time pivots.


Pascal

[asomani]

Pascal, in the document you posted today, did you use intraday or end-of-day drawdowns in the analysis?

Thank you.

[Pascal]

I used EOD

pascal

[mingpan.lam]

Hi Pascal,

In this doc, "IWM_GDX_Portfolio_Analysis", you mentioned,

"The combined portfolio is traded using
all funds available. If both IWM and GDX issue a signal, the funds are divided into two equal
amounts and each amount is invested in each ETF. If only one ETF issues a signal, all the
funds are invested in that ETF. If in the middle of a trade of one ETF, the other ETF issues a
signal, then half of the funds are switched to the ETF that issues a new signal. The only time
where no fund is invested is only when no signal is available."

How do we actually implement the combined portfolio?
For example, we bought IWM already (so 100% IWM) and then we have a signal for GDX.
Should we sell all IWM in order to buy GDX? But the problem is, the limit order to buy GDX may not be executed.

If let say, we don't sell IWM and buy GDX with limit order and allocated 50% to GDX and the order executed.
We will have 150% of the porfolio. And we can only sell half of IWM on the next day.

Cheers,

Ellis

[Pascal]

If a limit order is not executed during the day, the Robot will advsie new settings and will try to entrer the following day.

As for GDX, we will enter at the open from now on and not at a limit price.


Pascal

[mingpan.lam]

Ok, so, here's what happen when new signal issue with existing position

1. Sell half (GDX/IWM) at open

2.

GDX : buy at open
or IWM : limit order to buy

[barbados11]

Pascal, for clarification, today's limit buy of 58.88 on GDX would not have been purchased at the open since it is not a new signal and would indeed not be executed?

Thanks,

Pablo


If a limit order is not executed during the day, the Robot will advsie new settings and will try to entrer the following day.

As for GDX, we will enter at the open from now on and not at a limit price.


Pascal

[Pascal]

Exact!

pascal

[mingpan.lam]

Hi Pascal,

Based on this doc, "IWM_GDX_Portfolio_Analysis".
If you are 100% long on GDX and then after the close of the day, the robots give the following signal.

IWM long
GDX strong long

Should we close half of GDX and buy IWM with limit order?
Or, should we simply allocate half/half to GDX/IWM and follow the robots separately?

What is your suggestion?

Cheers,

Ellis

[Pascal]

Hi Pascal,

Based on this doc, "IWM_GDX_Portfolio_Analysis".
If you are 100% long on GDX and then after the close of the day, the robots give the following signal.

IWM long
GDX strong long

Should we close half of GDX and buy IWM with limit order?
Or, should we simply allocate half/half to GDX/IWM and follow the robots separately?

What is your suggestion?

Cheers,

Ellis

In the back-test, long/strong long are treated the same.
If you are 100% invested in one robot and then the other robot issues a signal, the strategy is to sell 50% and move it to the robot with the new signal.


Pascal