New small portfolio and new online simulator

I set up an account on Collective2 to simulate my trading systems. I also created a small portfolio version of my system to be accessible to the average investor. The portfolio name is Cybernetic System 1 – Small Portfolio. Here is a description of the system and the portfolio that I created for Collective2:

See my initial blog post for a description of the methodology behind this trading system.

Operationally, this system works as follows. The total amount available in the portfolio is evenly divided into 6 asset classes, with one ETF/ETN per asset class:

RJI – Commodity
UUP – Currency
EFA – International Equity
VNQ – Real Estate
SPY – US Equity
IEF – US Treasury Bond

I also compute a risk parameter which is used to ensure that no trade risks more than 2% of the total portfolio value.

Positions are reviewed and possibly updated only at the end of each month. Upon update, there are only two possible signals, long or short. Thus this system is always in the market (unless one does not want to go short [see below])

Note that while no leverage is used, a margin account is required to go short. However, if a trader is uncomfortable going short, then short signals mean go flat (cover existing long position). This will have an adverse effect on the performance of the system, but the system will still perform well.

This system is a version of Cybernetic System 1 – Hedge Fund Portfolio that was designed to be accessible to the average investor. Thus I set the starting account value to $30,000. To scale this to your particular account, simply take your account value, divide it by the account value of this system and multiply this value with the number of shares that I list when a new position is initiated.

Please contact me if you have any questions.

Note that the initial trades for this position will be posted here and on Collective2 on Tuesday, August 31 for market-on-open orders on Wednesday, September 1.

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