Portfolio Management

Build and manage a balanced crypto trading portfolio with QuantsEdge.

Access: Dashboard → Portfolio

Portfolio Construction

Diversification Principles

Three dimensions of diversification:

• Assets: Multiple cryptocurrencies across market caps (large/mid/small)

• Strategies: Trend following, mean reversion, breakout trading

• Time: Staggered entries, different holding periods

Sample Allocations

Risk Level	BTC	ETH	Large-Cap Alts	Mid/Small-Cap
Conservative	40%	30%	20%	10%
Moderate	30%	25%	25%	20%
Aggressive	20%	20%	30%	30%

Guideline: Conservative = 70%+ in BTC/ETH

Risk Management

Portfolio-Level Risk Limits

Maximum portfolio heat (total risk):

Total capital: $50,000
Max portfolio heat: 6%
Max risk at any time: $3,000

Example allocation:
- Position 1: $1,000 risk (2%)
- Position 2: $1,000 risk (2%)
- Position 3: $1,000 risk (2%)
Total: $3,000 (6%) ✓

Correlation Management

Avoid over-correlated positions:

• BTC and altcoins often 0.7-0.9 correlated

• DeFi tokens highly correlated with each other

• Layer 1 blockchains correlated

Rule: Max 3 positions in highly correlated assets. For 4th position, reduce size 50% OR close existing position.

Position Size Limits

Approach	Max Per Position	Max Concurrent	Single Asset Max
Conservative	20%	5 positions	30% portfolio
Aggressive	30%	10 positions	50% portfolio

Portfolio Monitoring

Daily Health Check (5 minutes)

Quick assessment: Get an instant overview of your portfolio including total portfolio value, daily P&L performance, active positions count, current margin usage, and identification of top performers and underperformers for quick decision-making.

Portfolio Health Metrics

Metric	Healthy	Warning
Portfolio Heat	0-6%	>6%
Max Position Size	<25%	>30%
Avg Correlation	<0.5	>0.7
Margin Usage	<50%	>70%
Active Positions	3-7	>10

Performance Tracking

Key metrics: Monitor total return percentage for overall performance, Sharpe ratio for risk-adjusted returns, maximum drawdown for risk assessment, win rate across positions for strategy effectiveness, and best/worst performing assets for allocation optimization.

Rebalancing

When to Rebalance

Triggers: Rebalance when asset allocation drifts more than 10% from target, during major market regime changes that affect your strategy, during monthly scheduled reviews, or when new capital is added to maintain proper allocation.

Example:

Target: 40% BTC, 30% ETH, 30% alts
Current: 50% BTC, 25% ETH, 25% alts

BTC drifted +10% → Rebalance
Action: Sell some BTC, buy ETH and alts

Rebalancing Methods

Method	Frequency	Pros	Cons
Calendar	Monthly/quarterly	Systematic, unemotional	May miss drift
Threshold	When drift >10%	Responsive	More frequent
Hybrid	Monthly if drift >10%	Best of both	Most recommended ✓

Tax note: Selling winners creates taxable events. Consider holding >1 year for long-term rates.

Capital Allocation

Adding New Capital

When adding $10,000 to $50,000 portfolio:

Approach	Method	Risk
Immediate	Deploy all today	Higher (market timing)
DCA (Recommended)	$2,000/week for 5 weeks	Lower, smoother entry ✓

Strategy:

1. Assess current allocation

2. Add to underweight assets

3. Maintain risk limits

4. Dollar-cost average over time

Withdrawing Capital

Process:

1. Close profitable positions first (lock gains)

2. Maintain balanced allocation (withdraw proportionally)

3. Keep emergency buffer (10-20% cash for margin/opportunities)

Position Concentration

Managing Winners

When position exceeds 30% of portfolio:

Option	Approach	Outcome
Take Profits	Sell back to target weight	Lock gains, rebalance
Trailing Stop	Let winner run with stop	Capture upside, protect downside
Hybrid (Recommended)	Sell half, trail remainder	Balance profit-taking and growth ✓

Concentration Risk Example

Portfolio: $100,000

60% BTC ($60K):
→ BTC drops 20% = $12K loss (12% portfolio)

40% BTC ($40K):
→ BTC drops 20% = $8K loss (8% portfolio)

Diversification reduces risk

Portfolio Strategies

Core-Satellite Approach

Core (70%): Focus on BTC and ETH with a buy-and-hold approach, minimal trading activity, and low risk base to provide portfolio stability and consistent growth.

Satellite (30%): Active trading strategies targeting altcoins with higher risk/reward potential, serving as performance drivers for enhanced returns while maintaining manageable risk exposure.

Risk Parity

Equal risk contribution: Risk parity allocation ensures each position contributes equally to portfolio risk, with BTC (low volatility) at 40% allocation contributing 25% risk, mid-caps (medium volatility) at 30% contributing 35% risk, and small-caps (high volatility) at 10% contributing 40% risk.

Common Mistakes

Over-concentration:

• Too much in one asset - concentration risk

• Fix: Trim positions when they exceed 30% of portfolio

Ignoring correlation:

• All altcoins move together - high correlation risk

• Fix: Limit to maximum 3 highly correlated positions

No rebalancing:

• Winners become too large - concentration risk

• Fix: Implement monthly threshold rebalancing to maintain diversification