Shanghai Composite Five-Day Loss Trigger for Portfolio Liquidation

Summary

The document describes a market-level stop rule that uses the Shanghai Composite Index as a risk signal. It proposes tracking the index’s cumulative return over five days and liquidating holdings if that return falls below −4%. The rule is intended to reduce exposure when the broader market has experienced a sharp short-term decline.

The document gives no backtest, performance comparison, portfolio details, or explanation of how the threshold was selected. It also does not specify whether liquidation applies to every holding, how positions should be re-entered, or how execution costs and gaps are handled. The idea is therefore a concise risk-control heuristic rather than a fully documented trading system; its effectiveness would depend on the portfolio and implementation.

Key ideas

• The rule measures the Shanghai Composite’s cumulative return over five days.
• A decline beyond the stated −4% threshold triggers liquidation.
• The index movement serves as a broad market risk signal.
• The document provides no empirical evidence or re-entry procedure.

Tags

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