It seems from the emails I've been getting lately that more and more traders are becoming concerned about the state of the markets, especially the stock markets, which is understandable.

And the concern is really around what's going to happen when the stockmarkets start falling.

What could happen to their strategies and accounts and how can they prepare for it now?

How can they protect their portfolios?

One form of protection that often comes up is using diversification to reduce portfolio risk.

However, a common question that is raised is how to actually go about diversifying?

Is there more protection in diversifying across markets, or staying in the same market and diversifying across strategies?

In this short piece of audio, Perry Kaufman discusses how he looks at diversification, and it's something you may want to consider when you're thinking about how to protect your own trading account and portfolio in a market downturn.

Disclaimer: Trading in the financial markets involves a substantial risk of loss and is not suitable for everyone. All content produced by Better System Trader is for informational or educational purposes only and does not constitute trading or investment advice. Past performance is not necessarily indicative of future results.