1. Home
  2. Docs
  3. DLPAL S
  4. Creating systems using grouping methods

Creating systems using grouping methods

Systems developed by grouping strategies may exhibit some very interesting properties. Each individual strategy or a group of strategies can be considered as a sub-system. There are many different ways the grouping can take place, depending on any common characteristics of the strategies involved. Different sub-groups can be grouped to form new groups, and so on. The possibilities are endless.

The practical implications from this property of strategies developed by DLPAL are many and allow increased flexibility in managing trading risk, among other things. For example, one possible grouping may be based on the maximum number of consecutive losers, as follows:

Group 1: Based on maximum consecutive losers

Sub-group 1:   Strategies with less than 2 consecutive losers
Sub-group 2:   Strategies with less than 4 but more than 1 consecutive losers
Sub-group 3:   Strategies with less than 6 but more than 3 consecutive losers

The above grouping may be called a CL Group (Consecutive Losers Group.  Another possible grouping is by profit target and stop-loss level:

Group 2:  Based on profit target and stop-loss

Sub-group 1:  Strategies with profit target less or equal to 2%
Sub-group 2:  Strategies with profit target greater than 2%
Sub-group 3:  Strategies with stop-loss less or equal 4%
Sub-group 4:  Strategies with stop-loss greater to 4%

The above may be called a Profit and Loss Grouping (PLG).

Groups may not be mutually exclusive, i.e., members of one group can be also members of another.

Grouping and sub-grouping allow increased flexibility in managing trading risk.