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Diversification while Trading Futures?
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Diversification while Trading Futures?

  #11 (permalink)
Elite Member
Futures Experience: Intermediate
Platform: Ninja Trader
Favorite Futures: CL GC FDAX
Posts: 118 since Jul 2012
Thanks: 85 given, 50 received

As i see it, if you have a base strategy that has can produce decent results/probabilities then your next stage is to diversify. What Kevinkdog says above is spot on.
Lets say you apply your strategy over say 4 or 5 instruments that have proven worthy of being included in your portfolio then your odds start to get much better. Lets say one of even two of them drag you backwards for a day or two then it shouldnt really knock you sideways too much.
Kevin is bang on. Its also a great way to smoothen out that eq. curve.
BTW it is most important that the whole set up is well funded from the off and well able to withstand the so called black swan day in case it happens in the early days. Its also very important that your base strategy does what you think it should do.
In terms of non-correlation, I think this is important. I have had good results with the CL, HG, FDAX, NG and a bit of 6E fired in the mix too. Why not give vix futures a whirl too

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The following user says Thank You to Bosch777 for this post:
  #12 (permalink)
Elite Member
Futures Experience: Intermediate
Platform: Ninja Trader
Favorite Futures: CL GC FDAX
Posts: 118 since Jul 2012
Thanks: 85 given, 50 received

kevinkdog View Post
After 20 some years of trading, I have come to the conclusion that diversification, done properly, is the closest thing to the Holy Grail that exists. You can get a smoother equity curve, and you don't have to rely on one trading method that may stop working one day.

The drawback is that it takes a lot more money to diversify, and Black Swan events (where everything becomes correlated for a while) can bite you really bad.

Kevin I tried to give you a rake of thanks but cant..! I fully agree with your view on this one.

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  #13 (permalink)
Trading for Fun
Sunnyvale, CA
Futures Experience: Advanced
Platform: TTTrader
Favorite Futures: CL
Posts: 171 since Dec 2012
Thanks: 8 given, 100 received

diversification across different futures products doesn't really lower your risk.

when trading futures, buy options to limit your risk.
eg. if you are trading CL (crude oil) futures, buy the options on those CL futures.

additionally the options protect you in cases when stop losses don't.

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