Algo Scoring and Preferences in Holding Periods by Christopher Johnson

Christopher Johnson

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Hi everyone,

I'm new to the community and I've looked through the Algorithm Scoring documentation but the mentions of time frame are somewhat ambiguous. So I'm curious, is holding period a factor in scoring? I understand there are many different ways to trade and different time scales to trade on but it seems like the holding period could be a valuable scoring component. Am I missing something? Is the method used for scoring algorithms holding period invariant?

I'm also curious if anyone has any thoughts on selecting a holding period for certain strategies? I figure strategies involving fundamentals are more useful for a longer holding period, but I see how fundamental factors could be used to supplement a mean reversion or momentum strategy in a shorter term.

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Christopher Johnson

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Douglas Stridsberg

4.8k ,

Hi,

There are two types of scores:

Direction score - when your buy (sell) insight closed, was the security higher (lower) than when you issued the insight? (binary yes/no)
Magnitude score - when your insight closed, had the security moved by as much as you had predicted? (continuous 0->1)

Neither of these have any dependency on holding period per se - aside from that they are calculated when the holding period has expired.You raise a good point - holding periods should perhaps be a more direct factor in the scoring. However, this is taken care of by the Terminal's advice on your alphas: it tells you whether you have a sensible number of trades per year, which should be inversely proportional to your holding period (roughly).

Christopher Johnson

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