Here is the number one secret to market diversification, spread the risk and trade in non correlating assets.

Here's an example of a non diversified portfolio.

Say you are bullish on Crude Oil and you buy a futures contract in crude, but what if the rest of your portfolio was full of energy stocks?

What you have created is one basket of eggs. In this case a basket of energy eggs. Your portfolio is dependent on one sector and that is energy. This is just too risky for the average investor. No matter how many stories you hear from the various experts saying that energy is going through the roof you don't bet the farm on one market ... ever.

You need to have as many non correlating asset classes as you can follow. This short video illustrates diversification perfectly.

The other key to diversification is cash. You don't have to be in all the markets everyday. Cash is a way of diversify ... Swiss Francs, Canadian Dollars, Euros, etc etc.

Here's an example of how a well diversified portfolio.

Stocks, bonds, futures and cash.

Out of those four asset classes, you have a multitude of choices. Stocks allow you to cover a broad spectrum of different domestic and international sectors. Bonds do the same thing, and the futures markets cover everything from raw commodities to financial instruments.

You can divide your portfolio into different percentages and allocate then to various asset classes. The more you divide into non correlated asset the less your risk will be.

Here's what I am suggesting. I call it the Will Rogers approach to trading.
The American humorist Will Rogers (1879 - 1935) had a special way of making a point. Here's another one of his insights about trading and investing.

Here are two of Will Rogers most famous quips.

"I'm more concerned about the return of my money than with the return on my money".-- Will Rogers

"Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it". -- Will Rogers

Will was right!

Only buy sectors when they are going up. (Here's how to tell if markets are going up). When they turn down, get out and move into cash. Then look for another non correlating market sector for your portfolio that's moving up. For sophisticated traders you can even short different asset classes which is a way to turbo charge your returns.

Learning when a market is moving higher or lower is not as difficult as you might think. Take a look at how you can tell if your favorite market is going higher or lower here.

Enjoy,

J. Adam Hewison
President, INO.com

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One of the most important tools that a trader possesses is his or her mind. Attitude can either make or break you as a trader.

To become a successful trader it begins with believing in yourself and having a winning attitude.

Everyone wants to be a winner, at least they think so. Unfortunately, most are not willing to perform the tasks necessary to become a consistent winner.

Winners generally achieve success by being focused on a goal. Being focused allows winners to remain committed to the tasks at hand. Most winners perform a lot of hard work, including a willingness to deal with sometimes mundane duties. Most of all, winners perform with an "I am responsible for both my failures and successes" attitude.

So, where does the would-be trader start to become a success? By focusing on the tasks at hand. Most of all, treat trading as a business. And, as in any business, money management is critical.

Money management, next to trend, is probably the aspect of trading most overlooked by smaller investors. Man, by nature, is an optimistic creature and the amateur trader often acts instinctively. Unfortunately, this instinct or optimism is often the undoing of the smaller trader.

When a person enters a trade, he does so with the hope that it will be a winner. When the position goes against him, he keeps thinking (or hoping) "it will come back." He knows he should have a stop in place, but hope keeps telling him to stay just a little longer since everybody knows, "you always get stopped out the day the market turns." Eventually, hope turns into frustration, desperation and, finally panic which prompts the trader to issue a GMO (get me out) order.

If the trader hasn't learned his lesson by this point, he develops the "I have to get it back" syndrome. He generally rushes into another poorly planned trade, throwing good money after bad.

Winners show several different characteristics. They enter the market knowing they can be wrong and, in fact are wrong as often as they are right. They have learned markets don't run on hope. They understand markets tell them when they are right or wrong. When a trader is losing money and getting worse, the market is telling them to get out.

Bad Trades

A bad trade is like a dead fish:The longer you keep it, the worse it smells.

Good Trades

When a trade is making money, the market is telling them they are right and to let the position ride.

Don't ever do this ...

Winners don't add to, or "average", losing positions. They dump the trade and go looking for a new opportunity. Successful investors may add to the winning trades. When ahead, they press their advantage while remembering that at any time the market can turn on them and prove them wrong.

In trading keep your mind clear and do not get emotional about a trade. Remember you are not married to a stock rather you are in the dating game.

Learn more about common sense trading.