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ATMS: Add ability to Rank by Strategy
Last Activity 4/15/2019 7:43 PM
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KC Kid

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Subject : ATMS: Add ability to Rank by Strategy
Posted : 2/28/2018 10:09 AM
Post #37092

One potentially powerful ranking technique is Rank by Strategy. In other words, select trade signals from the most profitable (or most stable) strategies first.

In HRE trading, this can be accomplished by first renaming your strategies in use so that alphabetically they sort themselves from highest to lowest performance rank. This assures that when multiple strategies fire on a symbol, the highest ranking strategy is assigned to the signal. Next, you use the strategy column in focus list as a sort column to allow the best strategy signals to rise to the top.

Someone correct me if I am wrong, but FL sorting has no impact on perf analysis reports or port sym runs. So there is no way to backtest the effect of ranking by strategy type as I describe above.

Extending this to ATMS, can we add the ability to sort by strategy? Potentially, this could be done two ways.

1. Add a second level sort tab that allowed you to add strategy sorting either as the primary or the secondary sort.

2. Add the ability to assign weights to strategies so that strategy becomes part of the ranking formula.

This second option does add a level of complication to developing and optimizing the ranking formula, but may prove powerful. Here is how I envision implementation:

Assume 3 strats are chosen for a market state - ARM RTM-17, XLS-19, VBX-3. You can assign strategy ranking weights to each strategy that will determine how much the strategy will influence the overall ranking.

Example: ARM RTM-17 = 5, XLS-19 = 4, VBX-3 = 1

The strategy ranking individual weights need to be programmable for each market state. While in a long bull state, the above ranking example may make sense, in a bear state, the chosen strategies may all be equally ranked in value.

Next, a ranking multiplier is applied to the strat ranks to determine how much influence the strategy impacts the overall ranking.

Example: VTY_Price * X + SMA(10)*SMA(V,10) * Y + StratRank() * Z

Optimize for X, Y, Z.

In retrospect, either of the options could be extended to ATS and made available to all OT 2018 owners.

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Buffalo Bill

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Subject : RE: ATMS: Add ability to Rank by Strategy
Posted : 2/28/2018 11:05 AM
Post #37093 - In reply to #37092

Just thinking out loud here, but if RTM17 is the best strat it must produce the best signals, so doesn't the trade ranker do this very thing?
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Jim Dean

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Subject : RE: ATMS: Add ability to Rank by Strategy
Posted : 2/28/2018 11:19 AM
Post #37094 - In reply to #37093

Using classic OT PortSim, if you rename your Strategies as you suggested, and use alphabetic (default) sort, then you’ll accomplish the process you described automatically.

However, I think the ATM approach, ranking the available trades based on avg MPE vs avg MDD is far superior, since no one strategy is always best.

[Edited by Jim Dean on 2/28/2018 11:22 AM]

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gbarber

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Subject : RE: ATMS: Add ability to Rank by Strategy
Posted : 2/28/2018 11:27 AM
Post #37095 - In reply to #37094

This is interesting. If one got this to work and one could select to use only the say top 10 strategies as they performed for say the last 15 days, would you even need to consider market state. One would always be using signals only from the best performing strategies in the last 15 days. So, it would be automatically switching strategies based on market conditions. Don't need to figure out what market states to define and find the best strategies for those states. It would get done on the HRE. Is that right? Not being able to test it would be pretty risky.

[Edited by gbarber on 2/28/2018 11:30 AM]

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KC Kid

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Subject : RE: ATMS: Add ability to Rank by Strategy
Posted : 2/28/2018 11:45 AM
Post #37096 - In reply to #37093

If your market state includes RTM-17 and other strategies, perhaps 10 signals will be generated on a given day. Assume 3 are from RTM-17, our preferred strat (for sake of argument) and the other 7 come from a mix of the other strategies. Current ranking uses an OT indicator combination. So it is quite possible that if market balance is set to say 4, that the ranking function may select all, some or none of the RTM-17 trades.

What I am proposing is to allow the strategy to play a role in the ranking. If two level ranking is implemented:

1. You could rank first on the strategy and then on the ranking function. The result in our example here is that the 3 RTM-17 trades will all be included in the 4 allowed (per market balance setting) and they will be sorted by the ranking function. Depending on available equity, perhaps only the first 2 trades can be taken. Result: we chose the best strategy and then took the top two choices by rank.

2. Thinking about it, I don't think making strategy ranking a secondary ranking will make any difference as it only serves as a tie breaker if the first ranking scores were equal (highly unlikely).

My alternate proposal allows factoring in strategy selection into the ranking formula with weighting, recognizing that strategy alone may not be the most important ranking factor.

I hope this clarifies my thinking.
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KC Kid

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Subject : RE: ATMS: Add ability to Rank by Strategy
Posted : 2/28/2018 12:31 PM
Post #37097 - In reply to #37094

Jim, you said:
"Using classic OT PortSim, if you rename your Strategies as you suggested, and use alphabetic (default) sort, then you’ll accomplish the process you described automatically."

I'm a rank amateur, so I will defer to your knowledge, but doesn't alphabetic sort in port sym sort based on the symbol name alphabetically, not the strategy name? But given that line of thinking, strategy sort is also an option. Does that choose the trades ranked strictly by strategy name? That would seem implied, but is not easy to verify just looking at the output.

Regardless, do ATS and ATM override that port sym setting? I will admit I have played very little with the software so far, mostly reading the efforts of others.

Second, you stated:
"However, I think the ATM approach, ranking the available trades based on avg MPE vs avg MDD is far superior, since no one strategy is always best."

What is MPE? Max profitable excursion? There currently isn't a way to rank this method, is there? Or is this your proposed enhancement?
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Jim Dean

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Subject : RE: ATMS: Add ability to Rank by Strategy
Posted : 2/28/2018 1:01 PM
Post #37098 - In reply to #37097

Sorry - I responded too quickly. As I recall (not at PC) there is a PortSim sort option “by Strategies” (as opposed to alphabetical). That was what I was thinking of.

Re the abbreviations - again I can’t recall the exact terminology - but it is the second of the three sort options (first is equity and last is maxProf/WDD).

Re the usefulness of Market States vs equity curves (either taken alone) - I believe both is better than either. MS filters help assure that the long term &/or broader market momentum is conducive to trading with strats that are designed for that environment. Recent equity curves show, amongst those strats, which symbols best fit the combo.

Sorry about the confusion. Hope this straightens it out.
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