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6 articles
Clear filtersDiversification and Correlation
Diversification only works to the extent holdings move differently. Counting positions is not the measure; correlation is.
Expectancy and Win Rate
Win rate is the share of trades that make money, and on its own it says little. Expectancy combines it with the sizes of wins and losses to give the average result per trade, the number that decides everything.
Liquidity and Slippage
Slippage is the gap between the price on the screen and the price actually filled. In thinly traded stocks it is frequently larger than the edge the strategy was pursuing.
The Real Cost of Trading
Commission is usually the smallest cost and the only visible one. The spread, the slippage and the tax treatment are larger and mostly invisible.
Scaling In and Out
Building or reducing a position in pieces rather than at once. It changes the distribution of outcomes and it is frequently confused with averaging down.
Portfolio Heat
The total amount at risk across every open position at once. Individually sensible positions can add to an exposure nobody chose.