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Trading just one instrument
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Trading just one instrument

  #1 (permalink)
Trading Apprentice
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Trading just one instrument

Hi all,

What are your thoughts on specializing in just one instrument? I firmly believe that each instrument has its own personality and behaves uniquely compared to another instrument. For that reason alone I think it's very beneficial to just specialize in trading one vehicle in order to become a master at understanding how that market moves. I also think it becomes distracting to trade multiple markets and possibly missing on moves. With that said, I think this would mainly hold true for those day trading, whereas those who are swing trading would rightly watch multiple instruments.

Would love to hear your thoughts!

Cheers,

PB

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  #2 (permalink)
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  #3 (permalink)
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PeanutButter108 View Post
Hi all,

What are your thoughts on specializing in just one instrument? I firmly believe that each instrument has its own personality and behaves uniquely compared to another instrument. For that reason alone I think it's very beneficial to just specialize in trading one vehicle in order to become a master at understanding how that market moves. I also think it becomes distracting to trade multiple markets and possibly missing on moves. With that said, I think this would mainly hold true for those day trading, whereas those who are swing trading would rightly watch multiple instruments.

Would love to hear your thoughts!

Cheers,

PB

Hi PB

I know quite a few successful traders who traded mainly one instrument, before moving on to others. One of them always says 'if you can trade one well you can trade another', which I agree with.

Depending on the instrument, it may be beneficial to follow other correlated markets, evem if you don't trade them, to base trading decisions on your instrument of choice.

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  #4 (permalink)
Market Wizard
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Hi @PeanutButter108

Yes - trading one instrument is a very good start or for longtime.
"Know thy market" as a friend here told always is not false.
I do so also.

Watch for an instrument (not fx) that has limited trading hours, a good volume and has patterns that you can recognize to trade. With that you will not fail - good trades!

GFIs1

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  #5 (permalink)
Trading for Fun
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PeanutButter108 View Post
Hi all,

What are your thoughts on specializing in just one instrument? I firmly believe that each instrument has its own personality and behaves uniquely compared to another instrument. For that reason alone I think it's very beneficial to just specialize in trading one vehicle in order to become a master at understanding how that market moves. I also think it becomes distracting to trade multiple markets and possibly missing on moves. With that said, I think this would mainly hold true for those day trading, whereas those who are swing trading would rightly watch multiple instruments.

Would love to hear your thoughts!

Cheers,

PB

I think it depends, if you are a discretionary trader without hard rules for when to open a trade, it probably is better to focus on just a few instruments, to get to "know" them.

If you have a system based on (multiple) indicators for example, you can use it on as much instruments as you want since you do not have to watch price moving all day. You can use some simple alerts to notify you when the indicators have the values you would be looking for.

I have such a system, currently using it on 9 instruments, 2 time frames for each instrument, i could add a lot more instruments but i am out of screen place
I still prefer to see all charts without clicking trough all of them in case an alert does not work, market is moving very fast, ...

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  #6 (permalink)
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xplorer View Post
Hi PB

I know quite a few successful traders who traded mainly one instrument, before moving on to others. One of them always says 'if you can trade one well you can trade another', which I agree with.

Depending on the instrument, it may be beneficial to follow other correlated markets, evem if you don't trade them, to base trading decisions on your instrument of choice.

Hey xplorer,

That's very true! I've heard many stories from great traders who solely trade just one instrument, and are passing this story on. I also believe your statement about following correlated markets to be especially significant when holding positions for longer than a day. Definitely think it adds a lot of validation when everything is aligned.

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  #7 (permalink)
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RDK91 View Post
I think it depends, if you are a discretionary trader without hard rules for when to open a trade, it probably is better to focus on just a few instruments, to get to "know" them.

If you have a system based on (multiple) indicators for example, you can use it on as much instruments as you want since you do not have to watch price moving all day. You can use some simple alerts to notify you when the indicators have the values you would be looking for.

I have such a system, currently using it on 9 instruments, 2 time frames for each instrument, i could add a lot more instruments but i am out of screen place
I still prefer to see all charts without clicking trough all of them in case an alert does not work, market is moving very fast, ...

Hey RDK,

That's interesting. I feel like in your case you can have your system automated and have the strategy written in an algo, in order to have it trading on whichever markets where it's able to be profitable.

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  #8 (permalink)
Trading for Fun
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PeanutButter108 View Post
Hey RDK,

That's interesting. I feel like in your case you can have your system automated and have the strategy written in an algo, in order to have it trading on whichever markets where it's able to be profitable.

I have 2 systems, 1 is automated but only working on 1 instrument.
The other i think will be hard to automate since divergance in macd is part of the system and so far i havent seen an indicator that looks for divergence that is working properly.

However i dont have the need to automate since i get the alerts, also on my phone. Then i manually check for divergance and if all rules are met i enter a trade.
So no need to be at my desk all the time

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  #9 (permalink)
Market Wizard
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Whether you specialize or not is largely going to be dependent on (1) if you trade with discretion and (2) frequency of trading. If you trade with a higher frequency and/or use more discretion, you will need to tend toward specialization unless you have automated signals whereas if you tend less toward discretion and toward lower frequency trading you will be able to trade more markets.

I think it is better to trade 2 non correlated vs. two highly correlated markets. You would be better to trade ES and maybe an energy complex like crude, natural gas, or crypto. You could also try trading a primary market like ES and then only trading signals or big trades in other markets.

One key with trading a single market is you have to be able to adapt your style of trading to different market conditions. For example, during lower volatility markets, it tends to work best to trade with a larger stop and small profit target but higher volatility markets tend to favor trading with tighter stops and larger stops. If markets are trending, you will need longer holding periods. It should be noted that with longer holding periods, you cannot actually beat the market on risk adjusted basis. You can only increase your leverage.

If you are trying to maintain a really super normal level of performance, the need to change gears is probably the hardest part because you will need to be able to move from a very high frequency of trading say 6 to 30 trades per day down to 1-2 trade per day. You will also need to know how to move from working limit orders off market to trading market orders depending on the conditions.

What might work well is to focus on trading with discretion a primary market and then try to come up with quantified signals in other markets to trade. I do think also the highly liquid markets are almost perfectly efficient. For example, if you see something that is likely to make market move up or down then bigger better traders tend to buy everything and sell it out for only a couple ticks. The market might still move toward the target but to get that you will need to take more risk. Almost all traders are only able to profit because they are taking various forms of asymmetrical and hidden risks that cannot be computed. We cannot really say if the return is sufficient for taking the risk no matter what the return is.


PeanutButter108 View Post
Hi all,

What are your thoughts on specializing in just one instrument? I firmly believe that each instrument has its own personality and behaves uniquely compared to another instrument. For that reason alone I think it's very beneficial to just specialize in trading one vehicle in order to become a master at understanding how that market moves. I also think it becomes distracting to trade multiple markets and possibly missing on moves. With that said, I think this would mainly hold true for those day trading, whereas those who are swing trading would rightly watch multiple instruments.

Would love to hear your thoughts!

Cheers,

PB



Last edited by tpredictor; April 14th, 2018 at 12:53 PM.
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  #10 (permalink)
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tpredictor View Post
Whether you specialize or not is largely going to be dependent on (1) if you trade with discretion and (2) frequency of trading. If you trade with a higher frequency and/or use more discretion, you will need to tend toward specialization unless you have automated signals whereas if you tend less toward discretion and toward lower frequency trading you will be able to trade more markets.

I think it is better to trade 2 non correlated vs. two highly correlated markets. You would be better to trade ES and maybe an energy complex like crude, natural gas, or crypto. You could also try trading a primary market like ES and then only trading signals or big trades in other markets.

One key with trading a single market is you have to be able to adapt your style of trading to different market conditions. For example, during lower volatility markets, it tends to work best to trade with a larger stop and small profit target but higher volatility markets tend to favor trading with tighter stops and larger stops. If markets are trending, you will need longer holding periods. It should be noted that with longer holding periods, you cannot actually beat the market on risk adjusted basis. You can only increase your leverage.

You make some great points. Me personally, I am entirely discretionary and that's the main factor for wanting to specialize. Also agree with being able to adapt to changing market conditions, and I actually think that's one thing that will throw off many traders. Market goes through many different cycles, and it takes a long time to work through them.

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