The Meaning of 'Portfolio' in EA
Today,
in EA,
the meaning (effect) of “Portfolio”
I would like to describe it.
“Portfolio”
is a term often heard in the world of investing, but
in Japanese, it translates to “diversified investment.”
So in the context of EAs,
what does building a portfolio mean (＝effect)?
First, the first point is,
I think many of you may already know,
the effect of “risk diversification.”
This means
that even if one EA unexpectedly goes into drawdown,
the other EAs take profits,
and thus revenue becomes more stable.
Up to this point, I think this is familiar to everyone. (^^;
However, in EA,
there is, in fact, one more,
a large effect of portfolio.
It is the
increase in trading frequency (＝ higher trade frequency)
that it brings.
What this means is
there are people who try to increase the number of trades with
a single EA.
Probably,
by increasing the number of trades,
they intend to raise profitability within a certain period,
and thus seek to raise the trading frequency,
but there is a trap in this.
That is,
“decreased trade accuracy due to too many trades.”
What this means is
for example,
there is an EA with a frequency of about “one trade per week.”
【PF2.0 EA】
If you then make it trade every day, what happens?
Probably the PF drops significantly,
and if you go too far,
you may end up with a profitability of PF=0.8 or even negative (the more you trade, the more you lose).
In that case,
now, if you run seven EA with different PF2.0 levels
what would happen?
If the performance matches the design,
“one trade per week × 7 EAs” = “seven trades per week.”
That is,
in other words, by composing a portfolio with multiple quality EAs,
you can increase trade opportunities without lowering the win rate (＝ PF).
This is the view.
Furthermore, EAs with high win rates that are not traded too frequently tend to have longer lifespans.
In other words, you can use good ones for a long time,
so
in that sense, high-win-rate EAs can be considered valuable.
I believe so.
From this,
if you want to increase trading frequency,
instead of clinging to a single EA,
increase overall trading frequency by using multiple EAs,
which is more effective for boosting profits.
That is how I view it. (( _ _ ))
P.S.
By the way, regarding the increase in trading frequency,
with my Revo_turbo and Scal_USDJPY boost values, for example,
as long as the profitability does not decline,
and you increase the number of trades as much as possible,
there is, of course, no problem.
Regarding this matter,
each user can
perform “backtests with turbo ON and OFF,”
and “backtests with different boost values,”
and I believe that will deepen your understanding of trading frequency and profitability.
(Reference information)
http://eaneko299.blog.fc2.com/blog-entry-282.html
https://fx-on.com/user/?i=1962&t=2
Neko Hakase
