Many so called experts will tell you that in order to be diversified you need a balanced portfolio of stocks across the various sectors of the Dow, S&P, or NASDAQ.  Some of these sectors include the Financials, Utilities, Health Care, Technology, Industrial Goods, and Services.  However, in today’s trading world with exchange traded funds (ETF), the entire Dow (DDM), S&P (SPY) and NASDAQ (QQQ) are electronically traded as one stock, moving them up and down in unison regardless of which sector you happen to be invested in.  To prove this, simply print out a one year chart of the Dow, S&P and NASDAQ, overlay them and you will see they all move together.  In order to truly be diversified, your trading capital has to be divided into markets that are able to move independently of one another.

I have identified six specific markets that meet these criteria that can be accessed through stock ticker symbols at most major online brokers and traded long or short.

They are as follows:

• (DDM) – Dow 30 stock index
• (TLT) – 20 Year bonds (interest rates)
• (UUP) – US dollar
• (DBA) – Agriculture (food prices)
• (DIG) –   Oil and gas markets
• (SLV) –  Precious metals market

Overlay these charts and you will find that they will trend independently and often move in opposite directions.

If you leave this site learning only one thing, learn this – if all of your trading capital is locked into one or all three of the major indexes – all your eggs are in one basket.  If you want to get truly diversified, you need to focus on independent markets – you need to Trade Like Mike.