EA Craftsman’s EA Course【022】The case where you think you’re diversifying risk, but it’s not at all diversified

Basket and Eggs

When people think of diversification of risk, what do you imagine?


Don't put all your eggs in one basket.

That proverb means not to put all your eggs in one basket, so there is a risk that all eggs will break if the basket is dropped or has holes.

So, what are the eggs referred to here?



In trading, they are the operating funds. Don't put all your operating funds into a single investment product.

And what is the basket? In Japanese, it’s a basket, but the idea is not to put everything into one basket, so prepare multiple baskets, right?

So what should you prepare multiple of in trading?

Earlier I said, "Don't put all your funds into one investment product," but what is an investment product?

For example, one that comes to mind is stock issues, perhaps.

Like Toyota Motor, distributing among multiple stocks rather than investing in just one company seems preferable, right?

However, as you all know, stocks tend to move together when they go down, don't they?

There are times when all stocks rise or fall at once regardless of a company’s performance. Is that really diversification of risk?

The same applies to FX currency pairs; trading with multiple highly correlated currency pairs is not diversification of risk.

Pairs that are inversely correlated are the same. When one side wins, the other side loses, resulting in a net zero overall...

Investment trusts are not only diversified across currencies but also across global stocks, government bonds, and various other commodities; they manage a portfolio. As I always say, it is not sane to have a stranger manage your sentimental treasures.

Let GPIF manage our pensions by themselves is enough to cause great losses.

As I’ve discussed in previous videos, to them it’s other people's money after all. Even if there are some declines in valuation, it doesn’t mean their own wealth is reduced.

So, stop handing over management completely.

Diversification by trading style

Then what should we do?

Since this is an EA craftsman’s EA course, we recommend diversification of risk such as discretionary trading and automated trading.


Humans and computers… even if you trade the same currency pair, for example USD/JPY, having completely different trading styles provides a reasonable level of diversification.

Also, busy trading multiple currency pairs with multiple methods on a discretionary basis is a high hurdle and can actually reduce performance, but with EA it’s easy.

Skill to discern the quality of reviewers

And about how to choose that EA, as I’ve mentioned in previous courses, it’s important to verify performance with your own eyes rather than rely on popular rankings.

In that sense, reviews and word-of-mouth are the same.


Famous places like Amazon are notorious for heavy-handed sponsored reviews. In products purchased on Amazon, you may find...

“If you give us five stars, we’ll give you a gift voucher.”

Sometimes such cards are included, and people in financial difficulty may be complicit. I would never support such wrongdoing. I would instead give a low rating when such a card is inside. It may even be removed from Amazon… it’s a bit like YouTube.

And even if it wasn’t sponsorship, there’s the question of the reviewer’s literacy as an EA operator.



Some vent their frustration by speaking ill of products after their own poor performance, or they didn’t read the manual, or didn’t use it correctly, or they operate without listening to others, with preconceived notions...

People who complain a lot are usually like that. When problems arise, they first suspect everyone but themselves.

Are they just venting emotionally, or are they objectively analyzing reviews after systematically following the developer’s advice for a fairly long period without letting emotions influence them…

to determine this skill becomes necessary.

However, in the end, I think it’s best not to be influenced by word-of-mouth or reviews and to 'do your own research.'

Particularly Japanese people are susceptible to 'recommended!' As soon as you enter a shop, you’re asked, 'What do you recommend?' and others decide for you, even though it’s about you.

There are many such customers, and it’s tedious to be asked questions, so restaurant menus almost always include something like 'Recommended for indecisive people like you!'

If you rely on that, you won’t develop decisiveness or literacy.

This has become preachy, so I’ll end here (laughs)

■ My developed EA concepts and operation policies

EA Craftsman’s EA (Three Arrows) is here