Originally published in French on objectifeco.com, January 8, 2011. The site was purged in 2016; this text survives only in the Internet Archive (Snapshot). Translated, not rewritten: what follows is the original argument as it was made, including what time has since proven wrong. Where that happens, you'll find a note from the desk, dated 2026.
In 2010, I learned:
The best trend-following system in the world still needs a trend to pull through. I used to think that over the course of a year, there'd always be at least one trend strong enough to make up for every flat or uncertain patch. Watching my own trading robot, and plenty of other systems I run on the CAC, has just shown me that isn't true. The market can stay rotten for a year, and I'm now convinced it can even go on for two or three.
Diversifying by trading style isn't enough. I've always argued that if you build a trading portfolio out of strategies covering the four major trading methods, one or two good performances would be enough to deliver a solid year overall.
In reality, the correlation created by the spread of benchmark-driven management, in all its forms, produced enough of these situations in 2009, and again in 2010, for what I believe is the first time in stock-market history, to trip up even the best diversification built on a single asset.
On the other hand, I'd always believed too much diversification would get in the way of good performance, and I was wrong about that too. In 2010, I built an ultra-diversified portfolio model of more than 75 trading systems, trading over 15 different assets across the planet, with a correlation between those assets low enough that overall performance became possible, with reduced volatility as the icing on the cake. For obvious competitive reasons, I can't say much more on the subject.
More than just learning something, I realised just how vast the body of knowledge automated trading actually demands. For a good many years, I'd been coasting on what I already knew. But in 2010, restarting my trading robot got me back into development, and I had a lot of exchanges with others: clients and contacts alike. That's when it hit me: the range of fields you need to master to do automated trading goes far beyond anything I'd have told you a year earlier.
I already knew that, however much experience you have, you'll never see everything the markets can throw at you. But this was the year I saw the largest number of unbelievable things in my career, on both price action and technique. I thought 2009 would stand unbeaten for a long time. I was wrong.
I'm not here to write a retrospective, but the flash crash of 6 May on the US market, followed by the one on 27 December on European indices, come a long way ahead of everything else. It's obvious that certain HFT operators were behind it.
Desk note, 2026: the 6 May 2010 Flash Crash is well documented: the Dow fell about 9% within minutes before rebounding. The joint SEC and CFTC report of October 2010 traced the trigger to one large automated sell order in E-mini S&P 500 futures; high-frequency traders amplified the fall rather than starting it. We could find no record of a comparable crash on European indices on 27 December 2010.
Directly linked to that, I got confirmation that retail traders considerably underestimate these possibilities, and it keeps driving them towards ruin, even the best of them. The causes are always the same: excessive risk, ignoring their own maximum risk limits, and a lack of diversification, in methods as much as in products.
Desk note, 2026: the name of Samuel's trading robot, a product of the firm he ran at the time, is left out of this translation, and so is the article's closing paragraph, which was about that firm's business.
Part of a series. This article belongs to Market Regime: Every Strategy Is Built for One Kind of Weather. Related: The Quality of Statistics and You Always Have to Trade the Same Way: True or False?. Background: diversification in the Ouinex glossary.
About the author. Samuel Rondot has traded since 1995, self-taught. Between 2009 and 2017 he published around 300 articles on objectifeco.com, abcbourse.com and his own blog, many of them drawn from what he saw in hundreds of client accounts. Objectifeco wiped its archive in 2016; the Internet Archive kept a copy, and every article republished here links to its original. He now runs the Strategy at Ouinex.
Trading leveraged products carries a high risk of loss.
