Portfolio Trading

"Portfolio trading means
much more than you might think."

Trading commodities as a group, sharing the same resources gives much different results than trading commodities separately.

When they run historical tests, professional traders use software that simulates live market conditions as closely as possible.

Each day of the test period is fully processed for each commodity on the trader's list as regards any signals or other action required.

Then the process moves on to the next day of the test period, where every commodity is again processed - and so on - day by day to the end of the test period. This is what commodity traders refer to as portfolio testing.

'At the moment' balances and open positions are used to determine available equity, so that only positions that could in reality be financed are opened.

The trade management techniques for market selection, risk control and money management that these traders have developed over the last 50 years, are also incorporated in this software

To regard portfolio trading as just trading a group of different commodities in some fashion or other, is quite inaccurate.

It would not be realistic to consider writing your own software or using spreadsheet programs for portfolio trading, as it would not be possible to obtain the specialized trading knowledge to do so. Neither would it be possible to achieve the run speeds required to complete multiple step tests (invariably required) in acceptable times.

Newcomers to commodity trading should be aware of the need for portfolio trading software that meets professional standards. The recommended ideal is to choose software that is used by successful professional traders.

 

Modus Trading
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Copyright David Bromley 2006
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