Adding Position Stops and an Index Risk Filter to a Small-Cap Strategy

Summary

This tutorial adds two risk controls to a Chinese small-cap equity strategy. The underlying template excludes stocks listed for less than a year and special-treatment shares, ranks by market capitalization, holds 30 stocks at equal weights, and rebalances on a five-trading-day schedule. A per-stock rule checks returns from each position’s cost price every day and exits when the gain exceeds 30% or the loss exceeds 10%.

A separate market filter uses the Shanghai Composite: a decline greater than 5% over five days triggers liquidation of all holdings and suspends trading for that day. The tutorial explains how to load the index data and apply this check before individual stops and scheduled rebalancing. It reports qualitatively that the modified backtest looked better, but gives no charts, metrics, dates, or statistical comparison. It explicitly cautions that these controls do not guarantee improvement and should be assessed for each strategy.

Key ideas

• The example strategy equally weights 30 small-cap stocks and holds them for five trading days.
• It checks each position daily and exits after a gain above 30% or a loss below 10% from cost.
• A five-day Shanghai Composite decline greater than 5% triggers a full exit and pauses trading for the day.
• The index filter runs before individual stop checks and scheduled rebalancing.
• The reported backtest comparison is qualitative, and the controls may not improve other strategies.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.