368: Profitable Algo Trading & Risk Management - Martyn Tinsley
Desire To Trade Podcast | Forex Trading & Interviews with Highly Successful Traders
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The Shape of the Curve
If you are too heavily invested in one particular position and all of your risk, if you like, is being driven by that one position. If the market turns against that position, you're not getting the benefits of diversification because the position on the other asset is so small. And vice versa, if you had all of the weighting in the second position, then equally, that would mean if the market turned against that, you don't get that level of diversification. By getting the right blend means you optimize the diversification to minimize that risk for a set level of return. I think that's what drives the shape of the curve that you see here.
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