Building a robust portfolio management system
Below is a quick step-by-step guide to building a robust PMS. Remember that each PMS requires a high degree of customization. You are building your own Iron Man suit. As a result, this guide will remain fairly vague.
- Formalize your strategy into simple trading decisions: buy/sell, how much, at what price. A trading sequence is fairly straightforward. Draw a flowchart and fill the sequence.
- Add decisions that come out of risk management: liquidity, weight, borrow utilization, net beta, and gross and net exposure. We saw earlier a risk reduction across the entire portfolio.
- From your monitoring tool, create a separate trading sheet with each trading decision in a separate column. This minimalist monitoring tool is particularly efficient for large portfolios.
- Beyond your field of vision, embed your trading rules. This can be columns in the far right of the sheet, macros on Excel, and scripts on Python. All you...
