What you will learn
- Correlated strategies
- Switching costs
- Drawdown scenarios
- Monitoring rules
Correlated strategies
Strategy allocation should connect a class to an explicit action, not merely a colorful dashboard label. Specify which strategy, size rule or inactivity condition changes and when the change becomes effective.
Switching costs
Compare the conditional policy with an unchanged baseline. Apparent success may come from the underlying strategy rather than the classifier. Include the costs and delays caused by switching.
Drawdown scenarios
Risk limits apply across active strategies and transitions. Temporarily overlapping old and new exposures can increase risk during a switch. Model the actual close, cancel and open sequence.
Monitoring rules
Allocation choices based on small class-specific samples can be unstable. Report observations per class and uncertainty. A class with a few favorable trades should not automatically receive a large allocation.
Worked example
A classifier switches from strategy A to B, but A's working order remains active. If both fill, the account can hold more exposure than either isolated strategy test assumed.
Try it yourself
Write a transition protocol that reconciles working orders and positions before activating the new policy.
Show the worked solution
Define cancellation acknowledgements, treatment of existing positions and the exact point at which new entries are allowed. Include a failure or unknown-state branch and test the combined exposure during transition.
Apply this to your course project
Evaluate a fixed regime policy without hindsight relabelling.
Keep the calculation inputs, assumptions and decisions with your work. Practical exercises are self-reviewed; the scored knowledge checks assess the questions shown, not an independent certification of practical competence.