Adrian Reid explains how to improve long-term trading performance by strategically adding new trading systems that are diversified relative to existing systems. He advises analyzing current systems to identify market conditions where they profit, go sideways, or lose money, documenting ideas, and prioritizing development of systems that make money in conditions where current systems lose money (highest-impact diversification). He recommends targeted development (e.g., add short-side if currently long-only) and disciplined idea recording due to limited testing time.
Chapters
The most important thing to improve your long term performance is to look at the systems you're trading now and strategically think about what are the market conditions where those systems make money, where they go sideways and where they lose money. And if you're going to investigate an idea or add a new system to your portfolio, it should be in one of the conditions where your existing systems either go sideways or lose money, preferably where your existing systems lose money. So we've got to be really careful not to be distracted by all the shiny lights, all the ideas that come up. You can have lots of trading ideas and you will, the more you get into systems, the more ideas you're going to have. But my suggestion, strong suggestion, is that you document those ideas, write them all down, and when you want to do some system development work, think about the highest impact.
Thing that you can do and then go find the idea which is in that area and work on and implement that. So if you were long only if you, if you had a trend following in a mean reversion system, a really good thing to do would be to look for a short side system rather than just testing your different ideas or testing the latest indicator or reading books and testing those, those ones be really targeted because we don't have much time, right? We all run out of time and I've got way more ideas than I have time for testing. But if I just add a new system which is diversified from what I've already got and makes money where my existing systems don't make money, then my portfolio impact is much, much better.
