Trading Plan Deadline in 3 Days
The final deadline for the Olympiad is in 3 days. I'm going to submit a revised trading plan before then but I was hoping to see if anyone could criticize it beforehand. It's copied below, omitting most of the long list of futures contracts which the system will consider (basically everything on the Chicago and NY futures exchanges):
--------------------------------------------------------
Max Dama
University of California Berkeley Haas School of Business
United States of America
Matlab with ActiveX API
Strategy I: Localized Regression, Global Macro Factor Model
Trade a long/short portfolio of the futures listed below. Entry points are determined once per week by a localized regression model based on a support vector machine with a gaussian (RBF) kernel. The three contracts forecasted to outperform (underperform) the most are entered long (short). Each position is exited at the end of the week or by hitting the stop. To control risk, positions are sized to set total weekly value-at-risk (standard deviation of returns) to approximately 12%, therefore each position contributes approximately 2%, with rounding error due to indivisibility of contracts. The stop is set 1-SD, 2.5% by construction, below (above) the entry price for long (short) positions. Normal entry and exit will use market orders.
This strategy makes money by exploiting information in price movements among many different contracts, which can be interpreted as macroeconomic factors. It exploits the inefficiency of human traders to correlate the data from >10 diverse streams. The strategy has the advantage of being adaptive due to weekly retraining on fresh data.
Exchange: CBOE
Contracts:
VXD CBOE DJIA VOLATILITY INDEX DV
VXN CBOE NDX VOLATILITY INDEX VN
VT CBOE S&P 500 THREE MONTH VARIANCE VT
IIK CBOE S&P 500 TWELVE MONTH VARIANCE VA
VIX CBOE VOLATILITY INDEX VX
RVX RUSSELL 2000 VOLATILITY INDEX VR
Exchange: CBOT
Contracts:
SR 10 YEAR SWAP FUTURES SR
ZN 10 YEAR US TREASURY NOTE ZN
...
...
-------------------------------------------------------------
Thanks for your input. In case it helps, the full plan including the rest of the list is on my blog, maxdama.com. I hope some others are ready to go because this is basically the deadline and yet there haven't been many messages here recently. If you're participating, I'd like to talk about the API and competition mechanics.
