𝐇𝐨𝐰 𝐜𝐚𝐧 𝐲𝐨𝐮 𝐛𝐮𝐢𝐥𝐝 𝐲𝐨𝐮𝐫 𝐨𝐰𝐧 𝐦𝐢𝐧𝐢 𝐇𝐞𝐝𝐠𝐞 𝐅𝐮𝐧𝐝 𝐰𝐢𝐭𝐡 𝐀𝐥𝐠𝐨 𝐓𝐫𝐚𝐝𝐢𝐧𝐠?
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.) 𝐃𝐞𝐟𝐢𝐧𝐞 𝐲𝐨𝐮𝐫 𝐠𝐨𝐚𝐥𝐬.
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, let’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.) 𝐃𝐞𝐟𝐢𝐧𝐞 𝐲𝐨𝐮𝐫 𝐦𝐚𝐫𝐤𝐞𝐭𝐬.
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, let’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.) 𝐁𝐮𝐢𝐥𝐝 𝐏𝐨𝐫𝐭𝐟𝐨𝐥𝐢𝐨𝐬 𝐚𝐧𝐝 𝐓𝐫𝐚𝐜𝐤
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 :
𝐖𝐡𝐚𝐭’𝐬 𝐭𝐡𝐞 𝐫𝐞𝐭𝐮𝐫𝐧 𝐨𝐫 𝐭𝐡𝐞 𝐥𝐨𝐬𝐬?
𝐖𝐡𝐚𝐭’𝐬 𝐲𝐨𝐮𝐫 𝐝𝐫𝐚𝐰𝐝𝐨𝐰𝐧?
𝐖𝐡𝐚𝐭’𝐬 𝐭𝐡𝐞 𝐫𝐞𝐪𝐮𝐢𝐫𝐞𝐝 𝐜𝐚𝐩𝐢𝐭𝐚𝐥?
𝐖𝐡𝐞𝐧 𝐝𝐨 𝐦𝐲 𝐬𝐭𝐫𝐚𝐭𝐞𝐠𝐢𝐞𝐬 𝐨𝐫 𝐩𝐨𝐫𝐭𝐟𝐨𝐥𝐢𝐨𝐬 𝐝𝐨 𝐰𝐞𝐥𝐥?
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!
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