Most investors understand the logic behind diversifying their assets. One asset class or industry may perform well as another one loses ground, so if you place capital in different areas you can smooth your overall returns.

The same logic applies to diversifying trading systems. Instead of focusing on only one system, traders can use two or more systems that aren’t highly correlated to offset weaknesses and improve a portfolio’s reward-risk profile. The idea is to mix trading styles to make sure the systems will complement each other: trend-following vs. countertrend, short-term vs. long-term, and so on.

The following strategy examines two different intermediate- term approaches — a trend-following system and a mean-reverting system with a trend filter.