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Removing positions from porfolio

Hi guys,

I've been working on a ML based algorithm and I've run into a major problem.
Basically, my code uses pipline (which on a daily basis choosed 8 to 12 stocks to trade). The problem I am having is that the positions stack on top each other as days progress. So I might start of, on the first day with something like 4 longed positions and 4 shorted positions, but in a month I'll end up with around 39 longed positions and 64 shorted positions. I want to get rid of the pipeline-chosen positions at the end of each day, so that the next day I start with a fresh batch of pipeline-chosen positions the next day.

This causes extremely high leverage! I've been looking for solutions pertaining to this problem and haven't been able to find one yet. Please look at my algorithm to better understand this problem. (Look the custom data graph for the long position/short position counts)

  • Naman
Clone Algorithm
2
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Backtest from to with initial capital
Total Returns
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Alpha
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Beta
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Sharpe
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Sortino
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Max Drawdown
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Benchmark Returns
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Volatility
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Returns 1 Month 3 Month 6 Month 12 Month
Alpha 1 Month 3 Month 6 Month 12 Month
Beta 1 Month 3 Month 6 Month 12 Month
Sharpe 1 Month 3 Month 6 Month 12 Month
Sortino 1 Month 3 Month 6 Month 12 Month
Volatility 1 Month 3 Month 6 Month 12 Month
Max Drawdown 1 Month 3 Month 6 Month 12 Month
# Backtest ID: 5a0dd4cb37edc24470ed555e
There was a runtime error.
2 responses

Hi Naman,

The problem is that your algorithm tries to close its positions right at market close, so there is not enough time for orders to fill. Instead, you could schedule close_position to execute 1 or 2 hours before market close so orders get enough time to fill.

An even better approach would be to use the Optimize API to rebalance your portfolio. With the TargetWeights objective you can specify a breakdown for your target portfolio, and then use order_optimal_portfolio to move your current portfolio to that objective. Attached you will find an example that also specifies a MaxGrossExposure constraint to cap leverage at 1.0.

Clone Algorithm
6
Loading...
Backtest from to with initial capital
Total Returns
--
Alpha
--
Beta
--
Sharpe
--
Sortino
--
Max Drawdown
--
Benchmark Returns
--
Volatility
--
Returns 1 Month 3 Month 6 Month 12 Month
Alpha 1 Month 3 Month 6 Month 12 Month
Beta 1 Month 3 Month 6 Month 12 Month
Sharpe 1 Month 3 Month 6 Month 12 Month
Sortino 1 Month 3 Month 6 Month 12 Month
Volatility 1 Month 3 Month 6 Month 12 Month
Max Drawdown 1 Month 3 Month 6 Month 12 Month
# Backtest ID: 5a0e0c020bf92043bc59e297
There was a runtime error.
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Thank you!