Fleet of Strategies

Continuing the thoughts from the November 1st post, we concluded with the mandates

  • Your strategy should behave in all types of markets
  • The markets are always changing, and the configuration must change too.

Indeed, I know it is not possible to make a perfect strategy that works all the time (10th July post). At this time I thought I needed to run three strategies to take advantage of the market (Uptrend, Downtrend, Sideways).

However, as discussed on October 11th, I could easily see periods where a profitable trending strategy did not take advantage of an obvious trend. To do this, I need a different set of configuration and that is when I started thinking about running multiple trend strategies.

Yes that’s right, multiple trend strategies. It makes sense, if we categorize trends by steepness, the same configuration for a sharp short trend will not work for a slow long trend. Likewise, I’m sure we will eventually need multiple ranging strategies depending on the volatility and scale of the range. I can even see a combination of both (a trending but ranging market).

The first step is clear though, we need to identify the different markets types. i.e., categorize different trends. I have actually done some similar work already and I can continue this (see Gradient Calculation for Moving Average – June 30th)

So let’s go with that:

  • I’ll do some research into categorizing different trends.
  • Once done, I can determine the best set of configuration for each type of trend.
  • I can ensure that each configuration only trades when it is best for that configuration.
  • Then I can run multiple configurations at the same time and I expect only one configuration or none to be active at any one time.

Maybe I’ll even look into combining them all into a single strategy. This may make backtesting easier but I suspect it will be slow. It really depends on what data and algorithms I need to categorize the different markets.

However, my current aim will be to run multiple strategies simultaneously. Often I have seen the term suite used, for example, a suite of algorithms etc. That’s fine, and indeed I have a suite of different algorithms that I use. However, I believe the term a fleet of strategies is more fitting. This is more appropriate as the suite of strategies are now operating under a single command.

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