Rebalancing question. Close or just move equity?

#1
Hi,
Let's say I open two offsetting trades on two accounts with 10k balance. Margin of 1k, (for simplicity assume 0 spead and 0 commission).
Account1: equity 10k & balance 10k
Account 2: equity 10k & balance 10k
Looking at ranges on the daily, I see the pair usually moves 8k in a month - but rare spikes from years ago have done that in a day! I take the trade.

The trades move to +5k and -5k. I now have:
Account1: equity 10k & balance 15k
Account2: equity 10k & balance 5k
With margin, that leaves me 4k in Account 2 so I want to re-balance...so do I...

a) Move 5k from the Account1 to 2:
Account1: equity 5k & balance 10k
Account2: equity 15k & balance 10k
b) Close all trades then Move 5k from the Account1 to 2:
Account1: equity 10k & balance 10k
Account 2: equity 10k & balance 10k
c) Partially close trades, move cash and reopen new ones?

d) A combination of above?

e) Something else?

The best one seems to be b) Close, move cash, reopen - but in reality this will cost up to 7 days of swap in trade costs (commission and spread)...so I am unsure what is recommended.

Re: Rebalancing question. Close or just move equity?

#2
This is a good question, one that I have thought about.

The user guide does indicate that it is a case of moving funds from one broker to the other, ie your option a. But it would be good to get confirmation that this is the best option.

Another question I have on a similar topic is what to do if you want to add funds to both accounts in order to trade an extra lot or two. Do you just open separate positions with the extra funds (at wherever the market is ), or close existing positions and open new combined positions so that all buy and all sell positions match ?

Re: Rebalancing question. Close or just move equity?

#4
Hello andrew1.

Re balancing without closing the trades is the better.
1) You save execution costs.
2) Your portfolio keeps producing gains without interruption.

I would do the following:
As soon one account is down to 4k margin I would deposit 6K and withdrawal 6k from the other account. Preferable, do this at the same time. By doing so you save another day or two. It is also ok to wait until the withdrawal is booked to your bank account.

When you see that it get's tight, you can close trades partially. You can do this manually or setup the software so that it closes xy % of all trades at a predefined margin level.

I hope this helps!

Alexander

Re: Rebalancing question. Close or just move equity?

#6
Instars wrote:
Thu Feb 20, 2020 8:38 am
OK,
but increasing lots is done only opening additional new trades? so if doing compounding in longer time period there would be a lot of trades running simultaneously. Wasn't there some limit in Master EA for maximum open trades?
Adding size is done by adding new trades, yes. And yes, if you add and add and add trades you will have lots of trades over time. This is not a problem for the software but it can become difficult to keep track.

To address this possible issue we developed a 'pairing function' for the new build version. The function allows you to group trades, automatically close old/small trades and add new trades. As result everything is kept perfectly structured and tidy.

The new build version will be available next week.

Alexander

PS: The number of open trades is not limited. Only the number of trades what you can add at once is limited to six.
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