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QuantSchool: Combining multiple forecasts

Strategic Forecast Integration

Effectively combining multiple signals creates higher-probability opportunities while maintaining proper risk management.

Core Combination Methods

1. Confluence Trading

• Definition: Multiple forecasts aligning on same asset
• Benefits: Higher probability, stronger conviction
• Example: Short-term and medium-term BUY signals coinciding

2. Portfolio Diversification

• Definition: Spreading across uncorrelated forecasts
• Benefits: Smoother equity curve
• Example: Tech sector BUY + Energy SELL + Forex neutral

3. Timeframe Stacking

• Definition: Combining different horizon forecasts
• Benefits: Captures both momentum and trend
• Example: Using weekly trend to filter daily signals

QuantWave Combination Tools

Tool	Combination Function
Correlation Matrix	Visualizes relationships between forecasts
Portfolio Simulator	Tests combined forecast performance
Signal Overlay	Identifies confluence opportunities

Optimal Combination Framework

1. The 3-Filter System

1. Primary: Directional alignment (80%+ agreement)
2. Secondary: Timeframe confirmation
3. Tertiary: Risk/reward compatibility

2. Position Scaling Rules

• Single high-conviction signal: Normal position
• Two confirming signals: 1.5x position
• Three+ signals: 2x position (maximum)

Risk Management for Combined Forecasts

1. Aggregate Risk Calculation

• Total portfolio risk stays below 5-10%
• Correlated positions count as single exposure
• Adjust for volatility clusters

2. Combination-Specific Stops

• Tighter stops for single-signal positions
• Wider stops for high-conviction combinations
• Trailing stops for stacked timeframe trades

Common Combination Mistakes

• Over-concentration in single asset/sector
• Ignoring negative correlation opportunities
• Mixing incompatible time horizons
• Over-leveraging "perfect" setups

Performance Tracking

• Tag trades by combination type
• Compare single vs. multiple signal results
• Adjust combination rules quarterly

Strategic forecast combination multiplies the power of QuantWave's analytics while controlling risk. By systematically identifying and scaling into high-probability confluence setups across diverse assets and timeframes, traders can build robust portfolios that outperform single-signal approaches.