Risk diversification is the distribution of capital among several different, unrelated investment instruments: stocks, bonds, currencies, cryptocurrencies, options, etc. There is no limit to a trader's imagination regarding the safety of their capital and improving trading results. Now, we will describe the main methods of diversification that even a novice trader can successfully apply in practice.
Diversification through Different Trading Assets
Choose trading robots capable of trading on multiple assets (for example, different currency pairs). Considering that the dynamics of price movements can significantly vary for each currency pair, a trading bot will yield different results on different assets. It may perform better on one asset and worse on another. However, overall, you will achieve diversified results.
For example, the trading bot Prop Firms Guerrilla (from our online store) trades on 16 different currency pairs, and Swing Trade Machine trades on 15 different currency pairs. A broad set of assets for trading provides excellent result diversification. How does it work? Imagine that an expert advisor incurs losses on 2-3 currency pairs. Meanwhile, profits on the remaining assets will allow you to offset the incurred losses and achieve an overall positive outcome.
Example of diversification:
Uses 15 assets for trading
Uses 16 assets for trading
Diversification using different trading robots
If your trading bot uses only 1-3 assets for trading, then you can “settle” (install) 1-2 other expert advisors on one trading account (together with this bot).
Main condition:
It is unacceptable to install several bots that use grids or martingale on one trading account. This will lead to an increase in the load on the equity of your account (if you have low leverage, it may not be enough). On one trading account, it is better to use safer automated trading systems that use Stop Loss and do not use a martingale grid.
For example, you can place a Project Samurai and Pips Snatcher expert advisor on the same trading account. They use completely different trading strategies and will be able to perfectly diversify each other's trading results.
Diversification by allocating capital across different accounts
Let's recall the old proverb that advises against keeping all your eggs in one basket. For a genuinely effective diversification, it's better to distribute your capital among 2-3 trading accounts (to start with) and install different trading robots on each account. In this way, if the strategy of one of your expert advisors proves to be risky and causes damage to your capital, it will only be a small portion of your overall funds.
Now, imagine that all your trading bots are more or less safe and yield different trading results. One bot performs better, another performs worse. Overall, you achieve a stable profit, and most importantly, the trading drawdown of one expert advisor will not impact the results of another expert advisor.
Capital Reallocation
If you are using multiple trading accounts with different expert advisors (trading portfolio), it is advisable to periodically reallocate trading capital among them. Specifically, withdrawing funds from the account with a more risky expert advisor and transferring them to the account where a safer bot is installed would be a prudent approach.
It is also wise to use the profits generated to increase the number of trading accounts and expert advisors operating on those accounts. Ultimately, your trading portfolio will gradually grow, and trading risks will decrease.
