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