More strategies=more trades=high position size=high volatility

Risk & Drawdowns
1

As I understand, multiple strategies are deployed to mitigate the risk. But when all strategies deployed are taking trade in the same direction, position size goes wrong and portfolio becomes more volatile. Now one can say we have to deploy uncorrelated strategies. There are not many uncorrelated strategies..

2

i also have a similar observation , i used the managed service and on an average there are 30 trades every day , and in most cases it is the same trade triggered by different algos. The amount i paid on brokerage is 1/3 of my net returns ….. Not sure what is the way to handle it .

3

can you explain how that managed service works and charges for that ?

4

Hi @nijinwilson @Arun_Ramachandran @Avinash

I would like to clarify that it is completely normal for multiple Algos to trade the same instrument. While the instrument may be the same, the reason for entering the trade is entirely different for each Algo.

Let me explain with an example.

Most of our Options Algos select contracts based on their moneyness - that is, whether the option is ITM (In-the-Money), ATM (At-the-Money), or OTM (Out-of-the-Money) - along with their own predefined trading logic.

Now, suppose two different Algos generate an entry signal within a short span of time. If the market hasn’t moved enough for the moneyness of the option contracts to change, both Algos may naturally identify the same strike as the most suitable instrument for their respective setups. As a result, they can end up trading the same option contract.

However, this does not mean that the Algos are taking the trade for the same reason. Each Algo has its own entry criteria, risk management, exit conditions, and overall trading philosophy. The instrument may be common, but the underlying logic behind the trade is independent.

This is also one of the reasons why, when building a portfolio, it’s important to look beyond just the instruments being traded and instead focus on factors such as the strategy type, market behaviour, risk profile, and correlation between Algos.

I hope this provides clarity.

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