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Hello,
Regarding the scaling for a strategy, I read the info about that, but something was a bit unclear.
If I do a 150% scale, I understand that it will follow the strategy leader 1.5X. ( so if he bought 100 stocks of AAPL, my account would buy 150)
But in a future contract situation, as there are no fractions if I have 150% scaling, it will be only one contract, I assume…
But if he buys six contracts at once, will my account buy 3? how does the scaling work when there are no fractions?
Great question!
All non-integers are always rounded down to nearest integer.
1.4 futures becomes 1 future
1.8 futures becomes 1 future
.999 futures becomes ZERO futures
Particularly from strategies that use a “legging in and legging out” techniques (i.e. buy 3, buy 2, sell 4, sell 1) … you will want to keep your scaling at multiples of 100%, since otherwise you’ll begin to introduce a tracking error.
Thanks for the clarification I didn’t think about the “legging in and legging out”
But just to be clear, if a manager buys at once 6 contracts (meaning he puts a market order)
and I have a 150% scale, I’ll receive just 6 contracts and not 9 correct?
or does the system do a calculation and says " ohh with his additional 50% I need to buy additonal 3 contracts "
Manager starts by BUYing 6. You have 150% scaling.
You will buy:
6 * 150% = 9
So: You will buy 9 contracts.
Now you are long 9.
Next, strategy manager issues a new signal:
BUY 3 contracts.
C2 will say: “3 x 150% = 4.5 contacts. But I always round down. So AutoTrade will buy 4 new contracts for your account.”
Now the position in your account will be 13 contracts (the earlier 9, plus this new 4).
Furthermore, every few minutes, C2 “synchronizes” your entire account on a position-by-position basis. In this case, C2 looks at the Model Account of the strategy you are following. It is long 9 contracts.
You are trading at 150%.
9*150% = 13.5
C2 rounds down and says, “MarmovWorld’s account should contain 13 contracts. Does it?”
In this case, it does! So nothing further happens.
But depending on your scaling %, and the trading style of the strategy, it is possible that this once-per-ten-minutes synchronization results in a slight adjustment of quantity.
That is why we recommend that - if you AutoTrade a strategy that “legs in or legs out” of positions, you try to set scaling at a multiple of even 100% increments, if possible. Otherwise, you may see these slight adjusting trades as strategies leg into or out of a position.
(It’s not the end of the world, obviously, but over time your results will diverge from the strategy’s, due to these synchronizations.)
Thank you for the long explanation now everything is clear.
I would suggest maybe adding this to the scaling explanation as I didn’t see it there like you explained.
Thank you for your time.
