DIVERSIFICATION part 2

Practical diversification can be implemented using a broad selection of markets within a single tactical system, a selection of different trading strategies for one product. or a combination of multiple systems and products. The objectives of diversification are:
1 . Lower daily risk due to the offsetting of losses in some markets and systems with profits in others.
2. Insure participation in major moves by continuously trading those markets in various groups that are likely to reflect fundamental changes. This avoids the need to identify which market will perform the best.
3. Offset unexpected losses caused by a system failing to perform in the current market, or a single trade that generates a large loss. It may be only had luck that one System gave a short signal in coffee the day before the freeze that moved prices limit-up for 21 days, but another system might have given an offsetting buy signal
4. Reduce cynosure in any one market or related group by, having funds distributed over many groups. If there are 10 unique asset classes. then an equal allocation only risks one-tenth of the portfolio. The more groups. the less the risk.