Shannon's Demon Rebalancing with RSI and Portfolio-Value Bands

Summary

This document presents a rebalancing method inspired by Shannon’s Demon. It values the asset holdings at the current ask price, compares that value with the account’s cash and total portfolio value, and trades toward an equal cash-and-asset allocation when preset imbalance thresholds are exceeded. The sell condition also requires RSI to be above its configured lower threshold; the buy condition requires RSI to be below its configured upper threshold. RSI is calculated from one-minute records.

The source includes example threshold and delay parameters but offers no explanation of their selection, backtest, or performance evidence. Its logic is therefore best read as a compact rebalancing illustration rather than a validated strategy. Results may depend on fees, spread, execution, asset volatility, threshold calibration, and the interaction between RSI and the portfolio bands. The implementation uses order-book prices and pauses after trades, which can also affect how frequently and at what prices it rebalances.

Key ideas

• The method monitors the value of asset holdings relative to cash and total portfolio value.
• It sells or buys when configured portfolio imbalance ratios are crossed, subject to RSI conditions.
• The rebalancing calculations aim to move the portfolio toward equal cash and asset values.
• The example provides parameters but no backtest results or evidence of profitability.
• Trading costs, execution prices, and threshold choices can materially affect outcomes.

Tags

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