Selecting Strategies for More Even Trade and Profit Timing
Summary
The document describes a portfolio-selection problem: individual strategies can be profitable yet generate trades in bursts, leaving gaps in activity and uneven profit growth. The author wants to combine strategies so that trades and returns are distributed more steadily over time. In a hypothetical screening pool, hundreds of backtested strategies meet preferred criteria such as profitability, limited maximum drawdown, and a high hit ratio, but many appear to trade at similar times. The desired portfolio would select a smaller group with less overlap and a smoother aggregate profit path.
The author also proposes allocating capital across separate strategies to diversify holdings. The post supplies no formal metric, selection method, or test results; its charts are unavailable, and the stated criteria do not establish future performance. It frames smoothness and trade timing as goals rather than demonstrating that evenly spaced trades produce stable income. A quantitative evaluation would need to examine strategy return series and co-movement, alongside risk and out-of-sample robustness, but those procedures are not provided in the exchange.
Key ideas
- Profitable strategies may generate trades in clusters, creating uneven activity and profit timing.
- The author seeks complementary strategies whose combined profit path has fewer large fluctuations.
- The proposed screening pool uses profitability, maximum drawdown, and hit ratio as initial criteria.
- Splitting capital across strategies is intended to diversify the assets held.
- The post offers no selection metric or evidence that smoother historical returns will persist.
Tags
Full text
# Measure to what extent the trades/profit are evenly distributed over time # Measure to what extent the trades/profit are evenly distributed over time current situation: I have several trading strategies which are working well. Unfortunately the trades are not evenly distributed over time. In some months I have several trades (so profit increases in short time), then a month with no trades etc... Goal: I want to run several trading strategies in parallel to have a more or less stable increase in profit (which is more or less related to the number of trades - no every trade is a win) In order to see which strategies are fitting well together I need some number/metrics. But I'm not sure what to measure/calculate. This is an example showing the number of trades per month (sorry the image is not shown in the post directly): https://imgur.com/a/thvV5K7 The first image at imgur above shows the starting situation. On the second image you can see, that the distribution is spread more evenly, e.g. on 2023-03 and 2024-02 the number of trades increased. Update: Some background information in case somebody has other approaches: Let's say I have found (via backtesting) 500 different strategies which make good profit with a small max. drawdown and high hit ratio (I'm focusing on these metrics right now). Unfortunately many of these strategies behave similarly (making the trades at the same time but with different profit/stop loss). Now I want to choose the best e.g. 10 strategies out of these 500 which fit well together. "Fitting well together" means in my opinion: they are not too similar --> the graph of my profit has less outliers (up and down) and is smoother. When trading with real money, I prefer stable income instead of high ups and downs although when still making profit at the end of the day (my nerves are thankful for this approach). Besides instead of just running on strategy with 100\$ I'm running 10 strategies with each 10$. By separating the money in 10 different strategies I want to get more diversity in which stocks/coins/... I'm holding my money. Thank's very much!
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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.