Portfolio Diversification & Risk Management!

The following is exemplary of how McKinley Capital might Diversify a Client Managed Futures & Forex Account and what particualr Commodity Future Groups and/or Forex Currency Paris will be traded for the designated account size. Portfolio Diversification is an important issue for clients to consider especially if you have a typical Stock & Bond portfolio. So many people I talk to are either 100% stocks (a really bad idea!), 70% Stocks & 30% Bonds, or the "very risk averse" 100% Bonds (don't expect much gain with this). Take for instance that 70% Stocks & 30% Bonds portfolio, if you take losses from the Stock Market, that has a greater impact to your portfolio. But if your portfolio is 50% Forex, 20% Interest Rates/Bonds, 10% Managed Futures, and 20% Stocks it has much less impact. I'm not saying don't invest in Stocks & Bonds, but Diversify into Managed Futures and Forex Currencies which historically have a low correlation with the Stock & Bond Markets. McKinley Capital trades in such a manner that client accounts can be profitable whether Commodity Futures or Forex Currencies are Trending up or down. (Chart used with permission, copyright TurtleTrader.com). McKinley Capital does not trade stocks.

However large of an account that you are willing to open, McKinley Capital has a diversification strategy for it. The larger the account the more sufficiently diversified it can be. Modern Portfolio Theory is all about reducing overall portfolio risk and thereby enhancing overall returns.

Risk Management, or if you prefer Money Management, is the most important part of trading. Trading is 90% Money/Risk Management & 10% actual Trading. It answers these important questions about trading:

• How much to risk in terms of your overall portfolio?
• How much to risk each trade?
• When do you enter the market?
• When do you exit the market?
• When to exit the trade if it becomes unprofitable?
• When to exit the trade if it becomes profitable?