This is the afternoon update from me on my $50K weekly gap strategy. After thinking about the issue I raised in yesterdays update about continuing to take all valid trades versus electing not to take some due to higher than expected open position cost, I decided to alter my approach to accomodate this problem. My decision was to reduce the weighting of the v2 gap setups (which are at 1.0 % of balance are a higher weighting than the v5 & v6 gap setups (0.5 % of balance)) to 0.5 % of balance, same as the v5 & v6 setups. Especially since the majority of open positions to date have been based on v2 setups, making this adjustment would free up a fair amount of capital. The cost of the adjustment unfortunately was some extra brokerage involved in partially closing out the existing positions (closing 50% of each position) - doing that freed up about $30K, bring the total cost of open positions (excl brokerage) down from about $76K to about $41K, allowing me to take the GMG trade that I missed yesterday, plus a new position in HVN which was triggered today. I took advantage of the fact that the portfolio was still up just after the open this morning, so made a few $'s on the volumes that I closed, clawing back a little from the losses in the first 2 weeks.
Below is the re-formatted table which shows the adjustments made to the various positions (CHC, CAR, ALL, BXB, LNK, NWS & TWE required adjustment) plus the 2 new positions in GMG & HVN (hopefully a little easier to read too):
I'm possibly costing myself some future profits in making the above risk adjustment to v2 gap setups, since these setups perform significantly better than the other 2 gap setups, however the objective of this initial 6 month period is to ensure I get the execution right and get some live performance data to substantiate the backtest data. During this process I prefer to err on the side of lower risk until I get the degree of comfort I need to increase the risk (as my risk tolerance increases) - and the extra weighting on the v2 gap setups is one of those money management techniques that is designed to maximise return vs risk (in addition to other measures I will introduce down the track after the probationary period).
