2017issue C0443-45
Intraday hedged pairs, news filters, and uniform return-on-capital exits
This archive case follows a trader who had not produced a profitable month for two years, then rewrote name filters, pair entry, and size. TradersWeek treats the blotter as a systems-writing problem: one daily procedure must decide which story names are ineligible, which same-session hedge may open, how large that pair can be after a volatility balance, and which return-on-capital number both stops the trade and takes the profit.
- A two-year blotter without a profitable month is rewritten as one procedure for filters, pair entry, size, and a shared exit, not as a motivation problem.
- The story-name-filter drops names with fresh headlines or an unfinished public narrative when those event dynamics cannot be tracked in time.
- A same-session-constraint and a hedged-pair keep overnight gap risk and unhedged market-wide moves off the book, with funds preferred on the short side.
- An atr-balance is followed by a pair-capital-unit, then a uniform-roc-exit sets both the profit target and the stop so per-trade risk stays comparable.
A blotter without a monthly profit
The case follows a trader who had not produced a profitable month for two years before rewriting how names were filtered, how pairs were entered, and how size was assigned. The archive presents that change as a rewrite of the daily procedure itself.
Which names stay off the sheet
An added research filter, the story-name-filter, excluded story names with recent news or unfinished public narratives when the trader could not keep up with changing event dynamics. Names flagged for specific risks were dropped.
Which hedge may open in the session
Overnight exposure was removed by a same-session-constraint that restricted activity to the same session. The archive describes that limit as a temporary step that would last only until further notice based on progress.
Entries were limited to a hedged-pair: stock versus stock, fund versus fund, or stock versus a related fund. Funds were preferred on the short side. At rollout the book used a sector fund versus an associated stock. A long or short offset was added where possible so a market-wide move would not sit unhedged.
How pair size is assigned
After names were chosen, an atr-balance scaled the two sides so each name's typical range contributed comparable risk before any dollar size was applied. Size was then scaled toward a 35,000-unit pair-capital-unit, a fixed average capital assignment per idea so every bet was sized the same way.
One number for the target and the stop
A uniform-roc-exit used a single return-on-capital percentage for both profit targets and stop-losses. Exits stayed uniform and per-trade risk stayed in check across names.
What the rewrite left behind
Earlier practice of banking many small wins and then increasing size into a few large losses was identified as a path to ruin when the rest of the book had no governing rules. Variance-first-sizing is the opposite preference: many similarly sized outcomes rather than occasional oversized bets, so a few losses cannot erase a run of small gains.
Oversized home-run attempts were abandoned after confirmation bias produced all-in trades that left large losing positions when the setup failed. That pattern sits on the impulse side of an impulse-versus-information-trade: a trade taken from boredom, desperation, or greed, rather than a planned trade taken for a defined reason.
The write-up argued that a small account needs tight management, controlled bet ratios, sizing that respects both account size and edge, and some form of stop-loss.