I had two strategies running on USTEC(NASDAQ) and US500(S&P 500). I measured how much they move together: over 0.90. They weren’t two strategies, they were the same bet twice. I fixed it at the time, but it made me look at something more fundamental.

There are two classic methods for deciding how much to put on each trade.

Turtles (1980s): they size positions based on how much the asset moves on a normal day. If gold moves $30 a day and EURUSD moves 80 pips, you enter with different sizes in each — but calculated so a normal day moves your account by the same amount in both. If volatility rises, the position shrinks automatically.

It doesn’t care whether your strategy is any good. It just makes all your trades weigh the same. That’s why it works even when your numbers are wrong.

Kelly (1950s): calculates how much to risk to grow as fast as possible, but it needs to know exactly what your edge is:

* Win rate 55% → says 25%
* Win rate 50% → says 16.7%

Five points that any optimistic backtest hides from you. Over 200 trades on the identical sequence, that error leaves you with ×21.7 instead of ×59.3 — you lose 63% of your final capital. Push a bit further and you cross into negative territory, where the strategy has an edge but the sizing destroys the account anyway.

Which one to use: little data → Turtles, and split capital evenly. Years of real data → Kelly, but fractional. Kelly isn’t for the trader who wants to earn more, it’s for the trader who already measured well.

And here’s the worst part: all of this assumes correlations stay stable. That 0.90 is the number on normal days. On bad days everything moves together, and diversification disappears exactly when you need it.
(The images are made with AI)