Core Strategies
Overview: four strategy types
Our framework builds on top of four categories of trading strategies:
| Trading signal/strategy | Returns Skew | Examples |
|---|---|---|
| Momentum | Positive | Trend-following strategies that profit from sustained directional moves |
| Breakout | Positive | Volatility strategies that capture range expansions |
| Basis (Carry) | Negative | Yield-harvesting strategies that collect funding rates and staking yields |
| Mean Reversion | Negative | Counter-trend strategies that profit from overshoots |
Skew is a statistical concept that we use very often in finance. Where an asset has a higher chance of a large down move than an equivalent up move, it said to have a _**negative**_ skew. However, If the large up moves are more likely, then an asset has a _**positive**_ skew.
By combining positive and negative skew strategies, we create a more balanced return distribution. Why diversify across strategy types? Because different strategies perform in different market regimes:
| Market regime | Performance |
|---|---|
| Trending market | Momentum and breakout outperform |
| Range-bound market | Basis (Carry) and mean reversion outperform |
| High volatility | Breakout captures expansions, mean reversion fades extremes |
| Low volatility | Basis (Carry) strategies harvest yield, while momentum underperforms |