How to diversify your portfolio in order to decrease risk of ruin
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  1. #1
    Join Date
    Jan 2016
    Posts
    9

    Default How to diversify your portfolio in order to decrease risk of ruin

    Taking in consideration that a black swan event will happen somewhere in time and brokers will "margin call" you , what do you do to mitigate that risk ?
    In practice, how do you diversify your portfolio ?
    What are the best instruments to balance positions in EUR/USD and other majors ?
    Last edited by ZEMANEL; 01-21-2016 at 01:46 PM.

  2. #2
    Join Date
    Nov 2015
    Location
    Netherlands, Tilburg
    Posts
    120
    If you are worried about risk of ruin, you are already trading to big of size.

    Try to risk 0.25-1.0% per position and no more than 10 positions at the time and you won't get ruind

  3. #3
    Join Date
    Jan 2016
    Posts
    9
    Yes. All of us will face a great amount of slippage due to a black swan event .
    I am not overtrading. I only make profits of 2% to 4% a month.
    I like it safe thats why i worry about risk of ruin...

    Any thoughts on how to diversify the risk ?
    Is Gold/USD a good way to balance EUR/USD ?

  4. #4
    Join Date
    Sep 2010
    Location
    Alberta, Canada
    Posts
    1,641
    Keep your holdings as diversified as possible. Ideally, you'll want to try to keep the absolute correlation of your trades as close to 0 as possible. As Armil has pointed out, having a set of diversified trading strategies based around different market conditions is also key.

    Some forex pairs that are most uncorrelated to EURUSD would be AUDCAD, EURJPY, EURCAD, EURAUD, CHFJPY, and CADJPY.

  5. #5
    Join Date
    Mar 2016
    Location
    Shanghai China
    Posts
    78
    I will advise more to use Option to protect yourself but of course nothing is free, you have to pay the premium for protection.

  6. #6
    In my mind the best way to diversify is not by markets, but by strategies and position sizing.

    There is a difference between worrying about risk of ruin (which I think is healthy) but being scared of risk is something else. You might need to have a look at why you are scared of uncertainty... if that is the case.
    Taking risk all depends on your appetite for risk.

  7. #7
    Join Date
    Mar 2017
    Posts
    36
    And does anyone trade with some several brokers to diversify risks?

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