- Dec 28, 2013
- Reaction score
The "Dump it here" at its very best, @ducati916 expressed an alternative view & respectfully didn't challenge the point I was expressing - "Diversification" & "Correlation" of strategies. In my previous post I qualified that "Diversification comes in many forms" then I went on to say "but I'm going to concentrate on Diversification of strategies"
Diversification of strategiesLets talk about diversification
Diversification lessons risk, by trading strategy that are not correlated. "Diversification comes in many forms" but "I'm going to concentrate on Diversification of strategies". Unfortunately sometimes trading any "trend following systems' there is normally a degree of correlation with the signals", the index being traded usually is reflective of the prevailing market conditions.
The strategies I discussed are "buy high & sell higher" & I posted many times "all trading profits comes from trading a trend".The strategies discussed, are not diversified. They are all buy low sell higher, or a long strategy.
Mean Reversion Strategy
Trading a Mean Reversion strategy on the All Ordinaries, equates to a high win rate, with high commission rates & small profits on each win = "Not Worth The Effort" (Been there done that)
Entry Criteria (drives the strategy)
Buying Pull Backs as opposed to buying Breakouts I regard as two different strategies. Diversification (there's that word again) of the entry can lessen the risk whilst riding a position at different stages of the trend, whether it's at the start of a trend, a pullback within a trend or a trend continuation, is what I was referring too in my previous post & as a footnote I then went on to tie "Correlation" & "Diversification" together.Buying a PB as opposed to a BO (or any variation) are simply tactics within a strategy.
In my next post
I'll post up some charts to explain why a variety of strategies are a welcome additions to my (Tool Box)