A CFD Trading Strategy That You Should Know About: Trading Multiple CFD Systems

So we've mentioned that trading multiple CFD trading systems can be an advantage.

Let's go into this a bit more.

See the effect of trading more than one CFD trading system is to do the following:

1. Smooth out the equity curve.

This happens assuming that the different systems are not closely correlated.

This means that as one system makes money, the other doesn't or can in fact lose some, and still have your equity going up.

The advantage of multiple systems is of course that you get the returns of both systems.

2. The drawdown of the systems when combined may not go up.

With a correlated system, the drawdowns will add up. But with non correlated systems, the drawdowns may be about the same, or in some cases, decrease.

Again, this relates to the smoothness of the equity curves.

3. To make more consistent return in different market conditions.

If you have a long CFD system, then you can only make money when the market is goig up. Or if you only have a short system, then you make money when the market goes down. But with both, you are more prepared for different market conditions.

Non correlated systems also means different trading instruments traded.

If you trade:

  • CFDs
  • Forex
  • Shares/stocks
  • Indices
  • Futures

Instead of just one type of instrument, then you're not dependent on one market performing well all the time.

So how do you trade non corellated trading systems?

Well, the systems maybe:

1. different types eg trend following versus mean reversion

2. different directions eg long versus short

3. different instruments eg CFDs, Forex, shares, indices, futures

4. different markets within an instrument, eg US CFDs, Australian CFDs, UK CFDs, Singaporean CFDs, etc

So these are just some of the factors to consider when looking at different markets to trade.