Backtesting and Diversification - The Essentials for Price Following
As a price follower when you analyse your trade statistics and performance metrics you quickly realise that your success is chiefly determined by the ‘outlier’. In fact, you can strip out the vast majority of your trades across an extended time-frame and classify them as simply random noise arising from a chance outcome in a large universe of meaningless data (aka an efficient market). Provided that you cut losses short and let profits run, this vast component of trades will simply contribute to a big fat net zero result to your overall performance.
Quidquid latine dictum, altum videtur