The Power of diversification

How should a good automated trading strategy actually be built? The market changes its structure, and of course volatility – so it makes sense to implement a strategy that is prepared for many of the changes. This can happen within one asset or through the use of synergy effects between different assets. Through diversification you minimize the risk of a strategy and of course also the performance, so it essentially depends on which risk targets have been defined

Ways to diversify your strategy

Of course, the easiest way to diversify an automated system is to run the system with different parameters within one asset or correlating assets. For example run the strategies for different timeframes or different “trend parameters”. Nevertheless, the rules to open positions remain very similar.

The use of different strategies for one asset minimizes this effect because of different entry and exit rules. In this example you see the three systems of this bundle trading one asset – but, what would happen to the other strategies, if one of them would go in drawdown for a while ? would they go the same way? this type of diversification is suitable for “dynamic” strategies without minimization of risk.

Minimum lot size 340 Eur initial capital

With a lower risk, of course lower performance too, you could try to setup the strategies to complement each other – that means to search for setups that allows one strategy is performing while another is moving sideways (marked in this example with green boxes).

Minimum lot size 340 Eur initial capital

By the way, find the strategy combination that suits you and your trading style – never forget to backtest and adjust parameters regularly!