Rough Rice is Smooth

July 1, 2024

Diversification is a bad idea.

If you want to make the most money. 

Almost every great investor you read about was not diversified. They focused on one thing or a very small group of things and hit it big when that thing took off.

Adding stock after stock in an attempt to “smartly diversify” almost never works.

If you want to make the most money. 

You just end up with a bad index fund that still always goes down when the general market goes down. Or a watered-down dividend account that neither has high yield or good price appreciation.

No, in stocks, diversification is not the way to go.

If you want to make the most money. 

Futures, however, is different.

In Futures, diversification means more money.

Why?

Because you can add things that actually work together. For equities, 2+2 = 3.17 (if you get lucky).

In Futures, 2+2 = 10 (metaphorically speaking).

So I’m looking hard for things to add to my Futures portfolio. And, as you know, I have an Incubation workspace on my Tradestation desktop where I look at several strategies trade in real-time every day.

And I noticed that one of those strategies is doing well.

But it’s something you probably never heard of: Rough Rice (RR).

Rough rice is what you think it is and this chart ebbs and flows with how rice is doing in the real world. As it turns out, it’s a good mean reversion instrument.

And it also has absolutely nothing to do with the stock market. It completely does its own thing.

It’s rice, after all. Not Wall Street.

How has it done the past two years? Here they are:

It’s made a nice amount of money recently. And here’s how it’s traded since I started tracking it:

The vertical line is when I put it in my incubation chamber. It’s had 2 winning trades in a row since then.

For my trading, I like to see a candidate doing well in recent times. I don’t want to add something to my team that is mired in a bad drawdown. I also like to see a winning trade or two in its first handful of trades.

This fits both requirements.

So what’s the bottom line?

It means that RR might be something I could add to my portfolio that isn’t correlated to the market.

It means diversifying with RR might be a way to make more money. 

We’ll investigate further and give the system details in our next Newsletter.

Talk to you soon.

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Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.