Making a good diversified portfolio | Forex Factory

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Making a good diversified portfolio

  • #1
  • First Post: Jun 26, 2012 4:04am Jun 26, 2012 4:04am
hi,

i'm opening this thread to discuss portfolio composition, i'm trading forex successfullly for a little while on just a few pairs but i think my system (not really a green light/red light system, it's more about reading volume, price ect...) can work almost everywhere, so i would like to check this out.

But i'm having headache trying to make a the most diversify portfolio without correlation, i'm using a website that checking correlation on severals timeframes but it's driving me nuts

so if you willing to share tips, portfolio or wathever that can be usefull, it could be beneficial for everyone

cheers
  • #2
  • Jun 26, 2012 7:03am Jun 26, 2012 7:03am
Quoting jopopo
hi,

i'm opening this thread to discuss portfolio composition, i'm trading forex successfullly for a little while on just a few pairs but i think my system (not really a green light/red light system, it's more about reading volume, price ect...) can work almost everywhere, so i would like to check this out.

But i'm having headache trying to make a the most diversify portfolio without correlation, i'm using a website that checking correlation on severals timeframes but it's driving me nuts

so if you willing to share tips, portfolio or wathever...
If your system is based on price action and volume then I agree it would likely would work on any financial instrument and not be limited to whatever fx pairs you are using.

Having said that some more info would be useful, maybe some charts? What actual correlations are you checking?
  • #3
  • Jun 26, 2012 7:44am Jun 26, 2012 7:44am
this is not about my trading system, but more about which pairs (or cfd, indexs...) aren't correlated (or not to much), and which degree of correlation we can accept in the portfolio.
That's what i would like to discuss here and this can be usefull for every traders
  • #4
  • Jun 27, 2012 8:26pm Jun 27, 2012 8:26pm
I'm interested in this as well in the hopes of creating a well diversified portfolio one day. There is also correlation between FX and commodities ie; Usd/Cad and Oil.
  • #5
  • Jun 30, 2012 7:07am Jun 30, 2012 7:07am
currently cable and gpbnzd has low correlation and both are prone to trending.

think of adding natural gas and soybeans cfds to the mix and you have a pretty well diversified portfolio.
wo-yoy! wo-yoy! wo-yoy! wo-yoi! wo-yoy-yoy-yoy!
  • #6
  • Aug 8, 2012 7:34am Aug 8, 2012 7:34am
you can use this website to check correlation, it's pretty interresting but it still giving me headache to find the best combining

http://www.forexticket.co.uk/en/tools/01-01-correlation

let us know what you are trading so we can discuss it

cheers
  • #7
  • Aug 8, 2012 8:13am Aug 8, 2012 8:13am
Quoting jopopo
hi,

i'm opening this thread to discuss portfolio composition, i'm trading forex successfullly for a little while on just a few pairs but i think my system (not really a green light/red light system, it's more about reading volume, price ect...) can work almost everywhere, so i would like to check this out.

But i'm having headache trying to make a the most diversify portfolio without correlation, i'm using a website that checking correlation on severals timeframes but it's driving me nuts

so if you willing to share tips, portfolio or wathever...
if you are seriously interested in portfolio optimization then there is no way around reading academic articles on that topic. However, you gotta be good at financial mathematics & statistics to be able to comprehend them. In any case, that's the way I am currently going as well. It requires a serious amount of study.
  • #8
  • Aug 8, 2012 9:31am Aug 8, 2012 9:31am
A diversified portfolio is for stocks, not forex
  • #9
  • Aug 8, 2012 10:02am Aug 8, 2012 10:02am
Quoting Euroscum
A diversified portfolio is for stocks, not forex

A Diversified portfolio apply to anything... Most "diversifiers" (does that word exist?) do it across different markets .. stock, commodities, metal, currencies.
But also could be done in between 1 market.


In forex, if you buy and hold EUR, NZD, YEN, etc... you are also diversifying.

J.
.
  • #10
  • Aug 8, 2012 2:07pm Aug 8, 2012 2:07pm
eurusd has very low historical correlation with gpbnzd and gbpaud....man, but the spread and swaps are atrocious on these two...I don't think there are any other pairs that are not highly correlated.

you have to think of trading softs like coffee, cotton or agris like soybeans and energies like natural gas.

think of the fact that if u trade eurusd you can't trade metals ,oil,interest rates,bonds, indices coz all this suckers show very high correlation ...and this is where most trendfollowing system fail.
wo-yoy! wo-yoy! wo-yoy! wo-yoi! wo-yoy-yoy-yoy!
  • #11
  • Last Post: Aug 9, 2012 9:05am Aug 9, 2012 9:05am
Quoting jopopo
But i'm having headache trying to make a the most diversify portfolio without correlation, i'm using a website that checking correlation on severals timeframes but it's driving me nuts
Portfolio means you don't put all your eggs in one basket. First not all of your money needs to be in speculative investments. The part you bring to the market, you may want to split up in a way that results of individual systems are not correlated, even if you're trading the same instrument.
So you can put an intraday (M1, M5) quant system on EUR/USD and a daily/weekly trend follower on the same pair. What matters money keeps rolling in ... but hey this is a very complicated subject, not to mention proper portfolio weighting ... I think the best is to consult a professional, I'll sure do that, if I ever get there LOL
forget about tomorrow, just steal away into the night
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