Diversification for Traders
Intro
Diversification reduces idiosyncratic risk but can dilute your best ideas; balance concentration and diversification.
Step-by-step
- Decide how many distinct uncorrelated setups you can manage well.
- Limit cluster exposure to avoid accidental concentration.
GOLD example
If you trade XAU/USD primarily, consider smaller positions in non-correlated FX pairs to diversify regime exposure.