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Next: Analyze metrics: Regularly monitoring performance, drawdowns, and market conditions is critical for refining your strategy portfolio over time.

6. Tracking Performance and Grouping Strategies: Maintain a portfolio of several strategies. Group them by market type (e.g., equities vs. commodities) or by aggressiveness (e.g., “conservative” vs. “aggressive”).

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Long/Short Pairs: Having both bullish and bearish strategies for each market (e.g., long ES, short ES, long CL, short CL) offers additional diversification and helps hedge exposure.

Mean Reversion Strategies: Identify when prices deviate from an average or band (like Bollinger Bands) and expect prices to revert back.

4. Algorithmic Strategy Ideas: Momentum Strategies: Buy (go long) when the price is above a long-term moving average (e.g., 200-day SMA) or sell (go short) when below. This aims to catch trends.

Example: If equity markets are falling (S&P 500 futures, “ES”), another market like oil (“CL”) might be trending up, which could offset losses.

3. Choose Your Markets: Trading across different asset classes (e.g., equities, commodities, futures) can reduce overall risk through diversification.

Extremely high returns (e.g., 100% per year) can be possible but come with huge drawdowns (50–70%), which most investors find difficult to handle psychologically.

2. Define Your Goals Decide on a target annual return and understand the drawdown (potential loss) you can tolerate. For instance, aiming for ~20% annual returns may entail accepting a ~10% drawdown.

While they often strive to outperform benchmarks like the S&P 500, the focus is usually on lowering risk (drawdowns) rather than purely maximizing returns.

1. What is a Hedge Fund Hedge funds pool money from wealthy individuals or institutions to seek higher, risk-adjusted returns across multiple markets.