ES + CL + more - having multiple futures auto-strategy

Xela said:
Do you have one strategy, on one instrument, that is tradable profitably, with a genuine, proven edge and that has an acceptable drawdown on its own? (I ask because it seems to me that until the answer to that question is a clearcut, unambiguous "yes", any time spent exploring the concept of diversification might actually be a distraction.)
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Yes, i believe i do based on backtesting since 2008 and also some live trading. @algofy. Thanks for bringing that point though. @Handle123 CL had a quite a bumpy ride since 2008 till now. I believe backtesting for that period gives a good confidence
 
autom said:
Guys,
I have got a ES auto-trading strategy going in ninjatrader.
I am also planning on adding a CL strategy and one more instrument may be NG in near future (of course with a decent backtesting)
My goal is to reduce the "combined" drawdown. I am thinking that if one strategy loses for some period, others will gain and overall i will not have a continued losing streak. And also, i will have more trading days than just once in 8/10 days
And i can use the same capital because all of them wont trade at the same day most probably.
Do you guys see any obvious issues with this ? I believe the total drawdown will be lesser than trading just one instrument.
There is a chance of all of them losing during same month etc, but very rare IMO
And they will all be intraday
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What you are looking for is diversification. You mention that you intent to use the same trading strategy on each of the instruments, so that does not provide diversification. Then you can look for diversification in the instruments which you use. CL and NG are both in the energy basket and have a rather high correlation. So this will probably not help you in finding diversification. It would probably be better to look for instruments which are in completely different asset classes.
 
HobbyTrading said:
What you are looking for is diversification. You mention that you intent to use the same trading strategy on each of the instruments, so that does not provide diversification. Then you can look for diversification in the instruments which you use. CL and NG are both in the energy basket and have a rather high correlation. So this will probably not help you in finding diversification. It would probably be better to look for instruments which are in completely different asset classes.
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You are right.. NG and CL kind of trended similar last 10 years. I will need to find 3rd diverse instrument in addition to ES and CL which should be liquid enough
 
autom said:
You are right.. NG and CL kind of trended similar last 10 years. I will need to find 3rd diverse instrument in addition to ES and CL which should be liquid enough
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Many classes to choose from. For example: metals, equities, bonds, volatility, agriculture, forex.
You could start by looking at this page: http://www.mrci.com/special/corr180.php and look for pairs that have a low correlation (i.e. their value is approximately between -20 and +20).
 
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