Going from one strategy to two is harder than going from zero to one.
The trap isn't a bad system. It's getting so good at one thing you can't see anything else.
A reader asked how to make the jump from a single strategy to a portfolio of them. The honest answer starts with a warning most people don’t expect: the hardest move in trading isn’t zero to one. It’s one to two.
Here’s why. Getting one strategy to work means you survived all the snake oil, learned the lessons the hard way, and built something that prints money. You’re in a tiny group. Nobody in your town does this. So you get proud, and you get calcified. You start thinking the way you trade is how trading works. If all you have is a hammer, everything looks like a nail.
I watched a trader build an entire identity around shorting low-float small caps. It worked, until locate fees went through the roof and the edge got swept out from under him. Not because his strategy was bad. Because the market changed. He’s now talking about getting a job. If he’d spent even a little time on one uncorrelated strategy, something to the long side keeping him green each month, he’d have runway to adapt instead of starting from zero.
That’s the why behind a second strategy. Not “make more money.” That’s obvious. The real question is what hole are you plugging. Is your capital sitting idle in the afternoon while you only trade the open? Do you get killed when the market rips because you only short? A second strategy fills a specific gap. Start with the gap, not the strategy.
Dave and I disagreed on the next part, which made it a good episode. He argues you should go deep, that the best traders squeeze enormous juice from one universe. I argue you eventually hit diminishing returns and should go wide before an external shock forces you to. We’re both right depending on your account size and your goals. A 25-year-old with $10k should go nuts chasing returns. A 50-year-old with $10 million optimizing for a smooth equity curve is playing a completely different game.
17.30% max drawdown over 25 years while the S&P drew down 57%. That number exists because we run ten uncorrelated systems, so no single one dying ends the business. When one draws down, members hear about it directly in The Drawdown Memo.
Free Starter System and 25-Year Backtest: https://www.statsedgetrading.com/the-25-year-backtest
Stats Edge Pro at $149.99/month with a 30-day money-back guarantee, or $1,499.99/year. Founding tier at $3,000/year for traders who want a 1:1 onboarding call.
— Michael Nauss, CMT, CAIA, CDMS