Market Neutrality
A Market Neutral algorithm is an algorithm that does not have a bias toward a long or short market regime. This means that it enters and exits both long and short positions with the same conditions, with the goal of profiting in both a bullish and bearish market.
The ScaleTrade algorithm was designed to be market neutral, with the goal of generating returns regardless of the market's condition. The algorithm considers long and short entries equally and does not have a bias towards either, allowing for it to remain market neutral.
Although we could alter the core logic of the algorithm to have a bias for the current market regime, we at ScaleTrade feel as though this would go against our goal of generating consistent returns in a safe manner. By catering the algorithm to fit the market regime, we also introduce issues of risk management and potentially large losses should the market turn against the fitted bias. This is why we intend to always have a fully neutral algorithm, regardless of future logic we may add in future iterations.
ScaleTrade gives users the option to enable or disable specific directional positions (long or short) should they choose. Some securities returns do greatly increase from these alterations, however past performance does not indicate future returns. We strongly suggest doing independent research on the security prior to actively trading with a position direction disabled.
ScaleTrade alerts will always have both long and short orders enabled, regardless of market conditions. Should any change come to any of these policies, we will be sure to present the research behind our decision and inform users of the change well in advance.
Last modified 8mo ago