Reducing Futures Trading Risk Through Diversification
Risk. It is one of the most critical elements in trading and perhaps the least understood.
One of my favorite definitions of the word comes from the preface of Peter L. Bernstein’s
Against the Gods: The Remarkable Story of Risk. Bernstein points out that risk comes from the early Italian riscare, which means “to dare.†In this sense, risk is a choice that allows you to define what will happen, rather than remain a victim to the vicissitudes of the unknown. Knowledge, of course, helps define how free we are to make choices to our gain. Understanding how risk can be reduced through diversification will make you freer to dare to make choices that enhance your futures trading gains.
The purpose of this article is to show you why a well-known concept—