How to build your own mini Hedge Fund with Algo Trading

How to build your own mini Hedge Fund with Algo Trading
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๐‡๐จ๐ฐ ๐œ๐š๐ง ๐ฒ๐จ๐ฎ ๐›๐ฎ๐ข๐ฅ๐ ๐ฒ๐จ๐ฎ๐ซ ๐จ๐ฐ๐ง ๐ฆ๐ข๐ง๐ข ๐‡๐ž๐๐ ๐ž ๐…๐ฎ๐ง๐ ๐ฐ๐ข๐ญ๐ก ๐€๐ฅ๐ ๐จ ๐“๐ซ๐š๐๐ข๐ง๐ ? 


As we get older, we increasingly want to protect our capital, making good investment decisions that have opportunity for profit and at the same time reduce our risk by diversifying into uncorrelated assets.


1.) ๐ƒ๐ž๐Ÿ๐ข๐ง๐ž ๐ฒ๐จ๐ฎ๐ซ ๐ ๐จ๐š๐ฅ๐ฌ.


First define your goals, how much do you want to aim to return a year and how much are you willing to risk?

 

Be realistic with your numbers, letโ€™s say for example you want to return 20% a year with a 10% drawdown. Very doable and realistic.

 

Is it possible to return 100% a year, essentially doubling your money? Well yes it is, but you probably have to accept a 50% drawdown or more if you are wrong which most can't stomach.

 

2.) ๐ƒ๐ž๐Ÿ๐ข๐ง๐ž ๐ฒ๐จ๐ฎ๐ซ ๐ฆ๐š๐ซ๐ค๐ž๐ญ๐ฌ.


Next define your markets, do you just want to trade indexes? Maybe you just want to trade commodities?

 

Ideally you want to trade multiple, so you can benefit from volatility and diversification.

 

For example, letโ€™s compare the S&P500 futures and oil right now.


While S&P500 is trending down, oil is trending up. Having strategies on both these assets would benefit you in opportunities.


Personally, I trade multiple markets, I have over 10 strategies that can go long and/or short. I trade all the major indexes, oil, gold, and bond futures for increased diversification and opportunity potential.

 

I still miss opportunities, wheat and corn were huge mistakes of mine for not having strategies in and recently have had incredible performance.


3.) ๐๐ฎ๐ข๐ฅ๐ ๐๐จ๐ซ๐ญ๐Ÿ๐จ๐ฅ๐ข๐จ๐ฌ ๐š๐ง๐ ๐“๐ซ๐š๐œ๐ค


Lastly group your strategies into portfolios and track them separately.

 

This will give you a drilldown performance of different strategies, you can group strategies by volatility, maybe you want an aggressive and conservative portfolio or maybe you group by the markets you trades, an index portfolio and commodities portfolio.

 

Then track your performance on a weekly or monthly basis then ask yourself these questions :


๐–๐ก๐š๐ญโ€™๐ฌ ๐ญ๐ก๐ž ๐ซ๐ž๐ญ๐ฎ๐ซ๐ง ๐จ๐ซ ๐ญ๐ก๐ž ๐ฅ๐จ๐ฌ๐ฌ? 


๐–๐ก๐š๐ญโ€™๐ฌ ๐ฒ๐จ๐ฎ๐ซ ๐๐ซ๐š๐ฐ๐๐จ๐ฐ๐ง? 


๐–๐ก๐š๐ญโ€™๐ฌ ๐ญ๐ก๐ž ๐ซ๐ž๐ช๐ฎ๐ข๐ซ๐ž๐ ๐œ๐š๐ฉ๐ข๐ญ๐š๐ฅ?


๐–๐ก๐ž๐ง ๐๐จ ๐ฆ๐ฒ ๐ฌ๐ญ๐ซ๐š๐ญ๐ž๐ ๐ข๐ž๐ฌ ๐จ๐ซ ๐ฉ๐จ๐ซ๐ญ๐Ÿ๐จ๐ฅ๐ข๐จ๐ฌ ๐๐จ ๐ฐ๐ž๐ฅ๐ฅ?

 

All of these will help in building your own mini hedge fund to protect your capital and hopefully produce a return. I hope you found value in this post!

๏ปฟ

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