Looking at diversification

I’ve talked about diversity in my trades before, on one of my old blogs, but it’s still something i’m very concious of.

I’ve recently closed a few of my trades off. The result of gaining experience on picking better trends to follow and realising that my first few picks , whilst still held after several months, were not really what I now understand to be ‘trending’ trades. I figured best to get out now whilst my losses were minimal.

As a result, and without any intention to do so, it turns out I closed off most of my SHORT positions. Leaving me with a portfolio of LONG positions all bar my SHORT trade on EUR/GBP. I’m very much into visual aids and as I result I put this little image together.

As you can see, I have the majority of my portfolio invested into LONG positions in US STOCKS and LONG UK STOCKS. I have no SHORT positions on US STOCKS and only one in UK.

My concern here is that i’ve kinda got all my eggs in one basket. If the markets fall i’m tending to have a bad day, when ideally I’d do well to get a few more shorting stocks back in there.

A mental note therefore that the next trade I open needs to be SHORT in something ideally. I might also consider Commodities if I see anything trending well and within my budget.

If I can spread my trades out a little more across the different markets, betting on up and down positions at the same time, I should be able to protect myself a little more from days where the markets move together in the wrong direction.


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