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Z8 & Z9 questions #481111
08/06/20 21:44
08/06/20 21:44
Joined: Jun 2013
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DdlV Offline OP
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DdlV  Offline OP
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Hi jcl,

Appreciate your help to verify/clarify some things about Z8 & Z9:

a) The manual states that Z8's default assets were selected on the basis of "industry diversity and by their supposed long-term prospects". Z9 doesn't have the same statement, but presumably Z9's selection criteria is the same?

b) For both, the Heat Map goal is to be as blue as possible, correct?

c) If Z9 doesn't have anything to invest in, it moves to Treasuries - is this configurable? Can something else be selected as the "park" asset?

d) What portion of Z9's better performance is due to the different algorithm vs. the different assets? Can this be determined by running Z9 with the Z8 asset list (and/or vice versa)? Or is something else going on?

e) Z8 & Z9 both follow the square root withdrawal rule, correct?

Thanks!

Re: Z8 & Z9 questions [Re: DdlV] #481114
08/07/20 02:38
08/07/20 02:38
Joined: Apr 2008
Posts: 585
Austria
Petra Offline
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Petra  Offline
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Posts: 585
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I do not know the selection basis, but b) yes c) yes d) algorithm e) no. No Z system has a withdrawal rule.

Re: Z8 & Z9 questions [Re: DdlV] #481116
08/07/20 07:38
08/07/20 07:38
Joined: Jul 2000
Posts: 27,977
Frankfurt
jcl Offline

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jcl  Offline

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Joined: Jul 2000
Posts: 27,977
Frankfurt
To the first question: Z9 trades major market sectors. But it would probably also work with stocks.

Re: Z8 & Z9 questions [Re: DdlV] #481142
08/07/20 12:40
08/07/20 12:40
Joined: Mar 2018
Posts: 62
hast29 Offline
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hast29  Offline
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Posts: 62
Hi DdIV,

there is more issues you may face with the Z9 setup, like in my case - I can not buy Z9 ETFs, due to my European residency. Nevertheless, the Gary Antonacci Book - Dual Momentum Investing is the gem to better understand the principle of asset selection and the algorithm principle. I followed the chapters and selected the assets.csv from what was available in my trading account.

Not to forget the Z8 gem - the JCL BlackBook :-).

Re: Z8 & Z9 questions [Re: DdlV] #481154
08/07/20 17:10
08/07/20 17:10
Joined: Jun 2013
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DdlV Offline OP
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Thanks all!

@jcl: To phrase the 1st question another way, Z9, like Z8 needs assets that are diversified, as much as possible uncorrelated, that each have an increasing history, and are expected go higher than where they are currently, correct?

@jcl, petra: Re. c), how does one select a different "park" asset? I don't see that in the manual...

@jcl, petra: Re. e), for the AR strategies, that don't automatically reinvest, the square root "rule" limits the amount of profits that can be withdrawn in order to minimize the risk of strategy blow up. For the CAGR strategies that reinvest automatically, such as Z8 & Z9, there are statements amongst these strategies that the reinvest is done according to the square root rule, and the amount not reinvested is retained as a buffer. So, the question becomes, can anything be withdrawn safely before completely stopping the strategy? If so, how much? According to what "rule"/formula?

Thanks!

Re: Z8 & Z9 questions [Re: DdlV] #481249
08/17/20 04:19
08/17/20 04:19
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DdlV Offline OP
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DdlV  Offline OP
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@jcl, @petra,

Would appreciate your comments.

Thanks.

Re: Z8 & Z9 questions [Re: DdlV] #481251
08/17/20 12:29
08/17/20 12:29
Joined: Jul 2000
Posts: 27,977
Frankfurt
jcl Offline

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jcl  Offline

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Joined: Jul 2000
Posts: 27,977
Frankfurt
No Z system will force you to reinvest. What you invest, reinvest, or withdraw is completely up to you. The bonds in Z9 are marked in the asset list as described in the manual, and you can use other assets instead of bonds if you want.

Re: Z8 & Z9 questions [Re: DdlV] #481252
08/17/20 17:35
08/17/20 17:35
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DdlV Offline OP
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DdlV  Offline OP
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Thanks jcl. But I'm still confused...

Re. Reinvest: I'm not sure how "force" entered the conversation. I understand that our accounts are ours to put funds in or take them out. There is, however, the square root "rule" guideline that a prudent investor should follow vis-a-vis withdrawals from the high leverage strategies.

The confusion is being generated by this sentence from the manual's description for Z8: "The backtest reinvests the capital growth to the power of 0.9, and keeps the remaining profit as cash reserve on the account for buffering drawdowns.", this for Z9 "... reinvesting profit to the power of 0.9 ...", and this for Z13 "The system reinvests profits using the square root rule, with the exponent determined from leverage. With no leverage, as on a cash account, profits are linear reinvested.".

When the manual says "[t]he backtest reinvests" does it really mean "[t]he strategy reinvests"?

Bottom line: For Z8 & Z9, can any amount be safely withdrawn, and then simply adjust the Capital slider per the remaining account balance as if starting the strategy new as described in the manual? Or is there some other consideration(s) to take into account?

Re. the Z9 "safe asset": The manual description of Z9 includes "If no sector or index has any positive momentum, the system invests in treasury." Not only is "treasury" a non-specific term, I can't see this in AssetZ9.csv. I see 5 assets in AssetsZ9.csv marked as 1 (bond): AGG, HYG, IGSB, TLT, and VOO. Not all of these are gov't treasuries.

So, bottom line: Which asset in AssetZ9.csv is the specific "treasury" "safe asset"? Or, does "the system invests in treasury" really mean "the system invests in all (some?) assets marked as bond"? If so, in equal amounts? Or some other distribution?

Thanks.

Re: Z8 & Z9 questions [Re: DdlV] #481253
08/17/20 19:32
08/17/20 19:32
Joined: Jul 2000
Posts: 27,977
Frankfurt
jcl Offline

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jcl  Offline

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Joined: Jul 2000
Posts: 27,977
Frankfurt
The strategy does not invest or reinvest, it only distributes the money that you invest. The backtest does indeed reinvest profits.

"Bond" and "treasury" are used synonymously in the description. Both mean just assets of type 1.

Re: Z8 & Z9 questions [Re: DdlV] #481255
08/17/20 23:40
08/17/20 23:40
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DdlV Offline OP
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Thanks jcl.

Re. Reinvest: So you're saying at each cycle the backtest computes

NewCapital = PreviousCycleStartCapital + 90% * ( PreviousCycleEndCapital - PreviousCycleStartCapital )

And then reinvests based on NewCapital, with the remaining 10% of growth staying in the Account uninvested?

Is this what someone running the strategy live should also do for safe trading?

Re. Bond/treasury:

a) Suggestion: In the manual, use "Bonds" - maybe something like "Bonds, e.g. Treasuries".

b) If one has 10 Bonds in AssetsZ9.csv, when "no sector or index has any positive momentum" does each of those bonds get 10% (i.e., evenly distributed)?

Thanks.

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