Day Trading Stocks & Futures

mohan.sic

Well-Known Member
Rebalance means revert back to initial allocation %. For eg: if you have 1L and want to equally allocate it to 5 strategies then each strategy will get 1L/5 = 20K.

After one month the allocation % will change due to the market dynamics..and the new allocation could be 15K, 25K, 30K, 20K& 35K, then to rebalance it we need to find the total value and divide by 5, 15+25+30+20+35 = 125K/5 = 25K each. This way for the next month your new rebalanced strategy will get 25K each.
so here we have 5 strategies( systems) and allocating 1/5th ( 20%) of total capital to each system. So as the price of the instrument changes, so will the trading cap allocated for each strategy changes. This needs to be adjusted back to 20% every month so that the total capital is always equally distributed to all systems...right?
 

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