The Portfolio of Strategies Concept
The Portfolio of Strategies concept is based on the theory that using multiple strategies
to trade an account can increase diversity, allocation and return. This approach gives us
the ability to take advantage of the strengths of each strategy while compensating for
their individual weaknesses.
Let’s look at a simple example of the Portfolio of Strategies concept in action.
Strategy 1 shows consistent gains over the tested period, but it did suffer a significant
drawdown at one point.
Strategy 2 is consistent as well, but doesn’t trade very often which makes it difficult to
capture a noteworthy gain.
Strategy 3 only generates short trades. It does very well in a bearish market, but doesn’t
post gains in bullish markets.
Now let’s look at the effect of taking the trades from all three strategies in the same
account.
These three strategies complement each other well as they have not only reduced the
drawdowns in the tested time period, but they have also increased the simulated gains.
This example shows how using multiple strategies can provide better results for a
trading account. You can explore the Portfolio of Strategies concept yourself by going to
the “Strategies” page and experimenting with different strategy combinations. Soon you
will see how combining good strategies can lead to a better result.