You can add location information to your Tweets, such as your city or precise location, from the web and via third-party applications. You always have the option to delete your Tweet location history. Learn more
3. Pick a sensible value based on your max position size, eg 5-25% of max position size.
I’m normally against optimising parameters based on a backtest but this is quite a benign optimisation. The main danger is that if your edge is overestimated, your optimisation will pick a value of b that is too low, so you should be conservative (eg double the “best” value of b)
In practise I normally do either 1 or 2, but 3 is a good check that you have selected a sensible value.
There is a mathematical model that produces this trading rule btw! If you have linear alpha, quadratic risk and trading costs proportional to trade size (eg a fixed bid offer spread) this is the trading rule that results. Can run through the math if there’s demand. Fin.
This is a sort of “folk knowledge” in quant finance. It’s rarely discussed in books/papers because it’s so basic that it’s assumed everyone knows it, so I couldn’t find a good reference for it. Derivation is below.pic.twitter.com/rEcPF114VZ
Nice thing about knowing the derivation is that it’s straightforward to extend it eg other t-cost forms (3/2 or quadratic), multiple assets (sigma becomes a covariance matrix) or introduce constraints on position size or turnover. Most extensions need to be solved numerically.
Twitter may be over capacity or experiencing a momentary hiccup. Try again or visit Twitter Status for more information.
