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Market Intelligence › Basic Terminologies
Relationship between different strategies and basis of allocation
Published by The Retail Trader · AUG 07, 2026 · Risk Management
Trading in more than one way is considered diversification. That's when those strategies work in different conditions - that's what they call a hi bet.
The question is not which strategy gives more returns. The question is when both of them come together, and whether their periods come together.
Do trend following systems are almost always good and bad at the same time. A trend and a mean reversion system often interfere with each other.
These are the things that make up the decision:
• Every strategy has its own drawdown — how much, and for how long.
• The relationship between the two returns.
• How much time and attention does it take to execute each one.
• How much is the sample – allocation is not decided on these trades.
Always start a new strategy with a small size, no matter how good the backtest is. Live data is the one thing backtesting can't provide, and that data shouldn't be expensive.
This article is for educational purposes only. It is not a buy or sell recommendation, a claim of guaranteed returns, or advisory guidance. Exchanges, SEBI and RBI change rules, rates and procedures from time to time, so verify every figure with your broker or an official source.