Boring trading equals lower risk and higher profitability

Sep 1, 2021

In other posts we’ve seen how trading two non-correlated strategies improves your rate of return and lowers risk. In this post I want to explain why trading additional systems will further increase your profits and reduce risk.

When you are trading individual stocks (or even indexes), corporate risk is a factor you must consider. Corporate risk arises when an unforeseen or unforeseeable event happens that impacts market price. This could be something as simple as the illness of a CEO or it could be a major issue like accounting fraud.

The traditional way of limiting this kind of risk is to reduce position size. The problem with this is that by reducing position size, you have less of your portfolio invested at any one time. Your overall profitability will likely suffer if you have too much cash out of the market.

The solution to this is to add additional non-correlated systems. Instead of trading just two systems, trade three, four or five simultaneously. This will not only reduce your per-company corporate risk further, but it will also give you additional opportunities for profit and keep your portfolio working for you.

Another kind of risk we need to plan for is the temporary non-performance of your systems. Even the best systems will experience short periods of underperformance. After all, one thing your backtesting can’t test is the future!

By combining multiple, non-correlated systems, each with their own entry and exit strategies, you’re diversifying your risk from the occasional underperformance. If you were ‘all in’ with one strategy, that underperformance would be a big deal, but with four systems, the distribution of the periods of underperformance almost guarantees these events will be spread out and only become minor annoyances.

One huge benefit of trading multiple, non-correlated strategies simultaneously is scalability. As your portfolio grows, you might find that your position size is large enough to move the market. Or, if you’re working with thinly traded stocks, even a small account could move the price around. This is really bad news, because you could move the market enough to eliminate the very gain you sought!

By trading multiple strategies simultaneously, your effective position size grows smaller. Instead of perhaps 5% of your total portfolio in any given stock, you might be at 2% or even 1%. This is the natural result of adding additional strategies and diversifying your account.

Additionally, by trading multiple non-correlated strategies simultaneously, we’re lowering the volatility of returns and therefore smoothing out the equity return. Lower volatility means the size of drawdowns is reduced, and this means that the future gains which are necessary to return to break even are also reduced.

In conclusion, your willingness to ask yourself hard questions about your personality, risk tolerance and goals will allow you to build systems that will perform for you in every market condition without taking on unnecessary risks or disturbing your peace of mind.

Trading multiple, non-correlated systems will reduce your risk further and generate additional profit opportunities regardless of the direction of the market. By automating your strategies, you free up your time so that you can enjoy the fruits of your hard work.

I’ve been sharing these strategies with the students at Trading Mastery School and their feedback is helpful in understanding just how transformative these rules are. Here are a few things students have shared about their experiences:

  • You do not need to sit at a computer screen the whole day; just enter orders each day before the market opens which, depending on the number of multiple systems you trade, will take you anywhere from ten minutes to an hour a day. This is the true ‘trader’ lifestyle!
  • Once you have done the work of building your systems to suit your style, situation, and risk tolerance, you can let your computer do the work and simply execute the trades. The vast amount of your trading work becomes automated, freeing you to live your life. Will you spend more time with family? Travel? Volunteer and donate? You are free now to make those decisions.
  • You do not need to watch the news or check newspapers, you will never worry about the economic state of the country, because you make money when the economy is good or bad.
  • You pay no attention to the fundamentals of the companies you trade in. In other words, all the daily noise about which stock has great prospects or is in trouble is irrelevant. Tune it out!

If this post has been helpful and you’re looking for the benefits of the ‘trader’ lifestyle, you might be a candidate for personal mentoring, which I offer to qualified students at Trading Mastery School You can learn more about how you can become an elite trader by clicking here.

Laurens bensdorp
CEO and Founder of Trading Mastery School
CEO and founder of


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