macrocephalopod

A lot depends on your time horizon. With long hold periods stuff like correlations, market neutrality, factor/sensitivity exposures matters a lot. This applies to long/short equity books, options portfolios, swaps books … anything where you hold for weeks/months.

For fast trading (hold < 1 day) that stuff matters less because you get diversification from the number of bets through time, rather than diversification from making cross-sectionally independent bets.

With very fast strategies where you are in/out multiple times per day you might literally treat every market as independent, perhaps keeping an eye on overall delta and hedging it with something cheap.

I try not to make any of my decisions contingent on whether I am in drawdown or at hwm. I don’t believe that’s informative for how the strat will perform in the future. The one exception is that if you lose/make a lot of money quickly it *may* be a sign that one of your

assumptions is wrong and you should revisit everything, and it *may* be prudent to cut risk while you do that.

On trade sizing I think sizes should be proportional to confidence and inversely proportional to risk. That assumes you can meaningfully distinguish confidence levels! If not then equal weight or risk-parity weight is better than overthinking it.

On overall risk levels, most often I am managing to a mandate so I don’t think about it often. Sorry nothing to add here!

The type of strategy I all working on most often is a big bucket of positions, typically 100s-1000s. Every position has an associated alpha and exposures to risks that I want to control. The alphas and the exposures change day by day or even minute by minute. Typically over time