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Trading multiple stratgies
Super Contributor
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Trading multiple stratgies

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Many traders will trade multiple strategies or the same strategy across different time frames and this can result in opposing trades in the same instrument. In other words, being long in one strategy or time frame and then short in another strategy or time frame.

The question is, how do we deal with it?

From my experience this is not really an issue if trading equity but happens a lot in ALSI, FX and commodity trading. I trade three ALSI future strategies and here’s how I deal with it.

The strategies are;

  • 7 / 21
  • Gap trading
  • Engulfing candles

The first point is to work out which is the primary strategy. That will either be the most profitable or longer trade duration strategy and for me that’s the 7/21 system. This gives a fair number of trades every month and trade duration can be a couple of days to even a week or more.

The other two strategies are very much shorter term usually a couple of hours at most and are intra-day strategies in that I do not hold positions over night with them. Further, they are less frequent, so the 7/21 is the dominant strategy.

For me the process is simple.

  • If I am in a 7/21 position I ignore any signals from the other two strategies.
  • But if I am not in a 7/21 trade then I will take trades form the other strategies.
  • If I am in a shorter gap or engulfing trade and a 7/21 trade confirms I will exit the shorter trade and enter the 7/21 trade.

In other words, the 7/21 is the top priority strategy and while I trade three strategies I only have one strategy trade open at any one time.

 

An alternative is to trade each system in a separate account but for me this has a few draw backs. Firstly, it will mean that when I am in two strategies at once I am either long and short (neutral) and this means I am doubling up on costs, spreads and potential slippage but with zero profit potential. Secondly all three may fire long or short trades and then I am very long/short with three open positions and that has markedly increased my exposure and hence my risk. Thirdly it means having three funded accounts with sufficient cash for margin and draw downs, so more cash needed to trade the systems.

I don’t see the benefits of separate accounts for the three strategies so I stick with one trading account for my ALSI trading three strategies but prioritising the 7/21 system.

Simon

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2 Comments
Occasional Contributor

Not sure what the 7/21 strategy is. Is it your own private strategy?

Super Contributor

@EkisDoep1

Yip, we will be doing a webcast on in in the next month or two