The Best Way To Trade A Portfolio

January 23, 2019

Defense wins championships.

That ubiquitous phrase is a staple of coaches and announcers everywhere.

So it must be true. It must be the secret to being the best in the world.

Is it, though?

The first problem is that it doesn’t really make sense.

Defense wins championships? A team can win if its offense doesn’t score any points? Of course not.

And that’s the problem. It seems like it’s true but it’s actually vague and potentially misleading.

Trading has these cliches, too.

One of my favorites is: Diversification is the only free lunch.

If we have the audacity to only trade instruments that perform well with our system, then that system will certainly fail in the near future because we were illogical and nearsighted.

The only way to make sure a system won’t fail is to trade everything. If our portfolio is profitable using the same settings, then it’s permissible to trade and surely robust. We don’t know what the future might bring. Maybe the unprofitable members of our portfolio will magically spring to life.

No, you can’t pick and choose in trading.

If we do, our trading accounts will burst into flames almost immediately.

Does this make sense?

Do we have to trade everything?

This week we’re going to put that truism to the test.

I just spent several days running backtests on a portfolio of instruments (a portfolio tester is my new toy; more on that soon). I took a tried-and-true system and traded it on 14 different instruments.

And you know what?

Over 15 years, the returns were amazing.

Trading a portfolio is a complicated and powerful way to grow our money. Finding the smartest way to do it is important.

The experts would say we need to trade as many things as possible with our system, regardless of how each individual  instrument performs.

And the results were good, over $200,000 in profits. Maybe this cliche is the secret ingredient after all?

We’ll give all the details in our next email.

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.