Diversification and Correlation

Diversification means spreading your money across different trades so one bad event cannot destroy you. But here is the trap most beginners fall into: owning five things that all move together is not diversification — it is one big trade in disguise.

If you are long Bitcoin, Ethereum, Solana, and a crypto-mining stock, you do not have four trades. You have one trade that the market calls "crypto goes up." When crypto crashes (and it will), all four positions lose at the same time.