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While splitting money between different systems is great, just how related is each system to each other?
For example, what if I had a few systems that bought breakouts in different time-frames? So system 1 might buy a 10-day breakout, and system 2 might buy a 20-day breakout. Is this really a good strategy? My experience says no.
I like to use different styles for each system. That makes the correlation much lower. For example, the Smart Money uses data that has nothing to do with price. The Breakout system buys breakouts (although it's more complicated than just an n-day breakout). PT2 buys ahead of a breakout. Breakdown shorts breakdowns. Base Hit buys on a dip.
By throwing these different styles into the mix, you can often have a system zigging while the other zags. This makes for a much smoother equity curve.
Side note - I believe this is while Richard Dennis had a tough time getting investors to stay with him later in his career. He made huge amounts of money, but the drawdowns were large, and he did not diversify between system styles I believe (can't say for certain, but Curtis Faith, one of the original Turtle Traders was only taught two breakout systems when he was trained…
For example, what if I had a few systems that bought breakouts in different time-frames? So system 1 might buy a 10-day breakout, and system 2 might buy a 20-day breakout. Is this really a good strategy? My experience says no.
I like to use different styles for each system. That makes the correlation much lower. For example, the Smart Money uses data that has nothing to do with price. The Breakout system buys breakouts (although it's more complicated than just an n-day breakout). PT2 buys ahead of a breakout. Breakdown shorts breakdowns. Base Hit buys on a dip.
By throwing these different styles into the mix, you can often have a system zigging while the other zags. This makes for a much smoother equity curve.
Side note - I believe this is while Richard Dennis had a tough time getting investors to stay with him later in his career. He made huge amounts of money, but the drawdowns were large, and he did not diversify between system styles I believe (can't say for certain, but Curtis Faith, one of the original Turtle Traders was only taught two breakout systems when he was trained…
