Strategy Performance Rotator: Adaptive Allocation
Allocates more capital to strategies that are currently performing well and reduces allocation to underperformers.
What is Strategy Rotation?
Strategy rotation is a meta-strategy that tracks the performance of multiple trading strategies and allocates more capital to those currently performing well. No single strategy works in all market conditions. By rotating between strategies based on recent performance, you can adapt to changing markets without needing to predict what conditions are coming.
Key Principles
Multiple strategies: Run several different approaches simultaneously. Performance tracking: Measure each strategy's recent returns. Dynamic allocation: Increase capital to winners, reduce to losers. Lookback period: Base decisions on recent performance window. Rebalancing frequency: Regular intervals to adjust allocations.
Implementing Rotation
Start by running multiple strategies (e.g., momentum, mean reversion, breakout) with equal allocation. Each week or month, rank them by recent performance. Increase allocation to top performers and decrease for underperformers. A simple approach: allocate 50% to the best performer, 30% to second, 20% to third. Rebalance on a fixed schedule.
Avoiding Pitfalls
Don't rotate too quickly—short-term performance can be random noise. Use lookback periods of at least 20-30 trades per strategy. Maintain some allocation to all strategies (don't completely abandon any) so you don't miss when conditions shift back in their favor. The goal is tilting toward what's working, not all-or-nothing bets.
Practice Risk-Free
Master these concepts with paper trading before risking real capital.
Start Paper TradingDisclaimer: This article is for educational purposes only and does not constitute financial advice. Trading involves significant risk of loss. Cryptocurrency investments are volatile and high-risk. Always do your own research before making any investment decisions.