Determining Strategy Capacity

breadfan · Post by **breadfan** » Fri Oct 24, 2008 3:23 pm

I'm looking for guidance on how to determine the capacity of a strategy.

The only paper on the topic I can find is here: http://www.qwafafew.org/filestore/download/469.

Additional papers, or examples on how to do this are appreciated.

opmtrader · Post by **opmtrader** » Sat Oct 25, 2008 3:48 am

Breadfan, In my opinion the paper does a good job of laying out some decent rules of thumb. In the past I've also tracked my backtested position size as a percentage of daily volume and things of that nature. For further detail you may want to take a look at average size in the order book at different levels and estimate how much you are going to move the market if you executed a market order of X size, how long it would take to chew threw a limit order of X size, etc. It is fairly basic stuff, but the fact that you are looking into these types of things should be applauded as it is a level of realism most system designers take for granted.

Dynamic Turtle · Post by **Dynamic Turtle** » Mon Oct 27, 2008 4:23 pm

Quite simply, whatever AuM MAN/CQS/RAB/GLG run the strategy at, divided by ten.

DT