Spent most of the day paying serious attention to details of one trading strategy — cleaning noise out of the signal, carefully legging into trades, minimising unnecessary turnover etc — and improved Sharpe of the backtest from 1.5 to 2.8
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Replying to @macrocephalopod
regarding "minimising unnecessary turnover": how do you know turnover is unnecessary without introducing lookahead bias?
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Replying to @swiss_quant
Simple example would be, A can be traded as a spread vs B or C. If you currently have an A/B spread on with weak signal and the signal for an A/C spread is strong but not enough to put a trade on yet, rather than trading out of the A/B spread it may be better to
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Replying to @macrocephalopod @swiss_quant
trade a B/C spread to get into a B/C position early. Essentially thinking about the whole portfolio rather than individual positions.
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Replying to @macrocephalopod @swiss_quant
obviously meant “trade a B/C spread to get into an A/C position early”
12:31 AM - 17 Feb 2021
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