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# Using multiple trading signals effectively

Systems based on DLPAL strategies generate signals in numbers proportional to the number of strategies involved. The more strategies present in a system, the more trading signals are generated. One may define three different types of trading signals:

1.  Signals indicating a position in the opposite direction of an already open position
2.  Signals indicating a position in the same direction of an already open position
3.  Signals that occur at exactly the same time all indicating a position in the same direction

Type 1 above can be handled by closing the open position. A riskier approach is to reverse position, by closing the open position and initiating a new one in the opposite direction.

Types 2 and 3 give rise to some interesting properties of strategies based trading systems and provide flexibility in managing the size of a position and its risk.

Successive are called signals with open positions that do not overlap. A new trading signal comes after the position of the previous signal is closed by either hitting a profit target or a stop-loss.

Coincident are called signals with overlapping open positions. A new trading signal indicates a position in the same direction of an already open position.

Clustered are called signals that are generated simultaneously and all in the same direction. Each trading signal in the cluster may have a different profit target and stops-loss.

There are several ways one can deal with the different types of strategies and take advantage of multiple trading signals:

A.  Ignore coincident signals. This is the simplest way of using systems based on DLPAL strategies. Whenever a signal is generated in the same direction with that of an already open position, that signal is ignored.

B.  Use coincident signals to increase position size.

C.  Use coincident signals to move the stops-loss/profit-targets. This is a useful application of coincident signals. When a coincident signal arrives, it may be used to move a stop-loss to a new level, in accordance with the new signal entry price. The same applies to the profit target.

D.  Use of clustered signals for confirmation. When clusters of trading signals are generated, they can be interpreted as either a confirmation of an existing position or as a new position with increased probability of success.