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One important consideration that I haven't seen mentioned yet is timeframes. If you're trading very short, intraday time-frames, then you will need to focus on just a few markets. If you're trading off a 5-minute chart, for example, then every single one of those five-minute bars has some relevance to your entries, exits, and position risk-management. Even if you are fully automated, you need to monitor your systems and trades in real time.
As has also been mentioned, every market has its own behavioral quirks, and you need an intimate knowledge of these characteristics in order to be consistent, especially on an intra-day basis.
But if you're a discretionary, big-picture macro trader in the style of, say Stan Druckenmiller, then you will trade every product available, only with much less frequency, and not at the same time. You'll be focused on daily, weekly, and monthly charts and can take a bit more time to formulate strategies and manage positions.
In the end it comes down to an effective allocation of your limited analytical resources. If you stretch these out too thin, your risk of missing something, or making a mistake, goes up exponentially, and ultimately this type of carelessness can quickly wreck even an otherwise effective strategy.
I am now trading only two instruments and only one at a time. However I have tried many different products over the years and I still take some trades on other products from time to time.
I think that even if you will probably end up focusing on only a couple of products, trying different instruments will allow you to understand markets better.
To gain understanding you need to maximize diversity, this is true in many fields....then with time you will seek simplicity and narrow down your focus.
Years ago I worked on a fixed income trading desk at Bear Stearns. The Bear was considered one of the best "trading houses" on the street since its investment banking side wasn't that strong. The firm was built on trading and we had huge credit lines for both flow and prop trading. Ace Greenberg who was a legendary trader and COO had a rule that you only traded "your market." The rationale being the complexity and nuance within a market required specialization and focus. Our head trader tried to hedge a position going bad with an offsetting somewhat correlated (theoretically) position in another type of security. Ace found out and fired him on the spot in front of the whole trading desk.
Derivatives and an understanding of correlation relationships have probably changed that rule, but I think it makes sense generally. For me dealing with the information flow across markets and the managing of positions requires the economies of scale associated with specialization and focus.
I think this is a very good question and in my opinion it depends on how you trade meaning the frequency (how many how often) and the length (how long you stay in a trade) of your trades. All traders have a method or system that they apply to their trading. If you apply that method and place your entries based on a Day chart, 240 Min chart or even a 15 min chart in theory that would be the frequency on how often you would need to make a decision and it would be easier to manage multiple instruments. However, that very same method applied to a 4 tick Renko chart would be more difficult as you can't afford to miss your set up because your are scanning other instruments. Personally, I scalp and my average trade almost never lasts more than a few min so there is an advantage to getting to know how one instrument moves and sticking with it. Some days will be better than others.
Great question @TheTradingDojoMX,
it's brought up a few answers for many of my questions,
as a non profitable trader since the GFC
i swing from not knowing whether to stick to 1 inst or many, when i try 1 inst i fail to wait for the set ups, when i swing and use alerts i'm probably asleep, i want to swing rather than scalp but scalping feeds my need to want to trade, and so the vicious cycle of loses goes, i don't write code so that's not an option, have looked at recommendation subscription but don't like being fed and paid for mentoring a few times, wasted money, never say never, haven't met the right fit,
only grace is knowing i am being philanthropic and knowing success can be achieved,
my journey is finding the obstacles i don't see preventing the progress, like what combination will suit ME as in time frame someone mentioned or perhaps using options due to time constraints or simply a lack of ability to learn the skill for set ups or edge is even a consideration in the mix of all the strategies that will be listed in this thread,
the reason i mention this is because it would be interesting to know what your current method is and what your experience of it has been?
how long have you been trading ?
or are you a newbie and just curious before you start,,,
look forward to your reply,
"If you believe you CAN, OR believe you CAN'T, you're RIGHT!"
I think it also depends on how you find your trades..
Do you look for technical setups (maybe a break of an Inside day,) or wait for Data releases, in which case you've probably got time to look at quite a few markets, waiting for your situation to happen.
Or do you just trade ongoing momentum/pullbacks/reversals etc, as situations arise... which probably means you don't have time to look at several markets..
Professional traders are, in almost all cases, very specialized in a narrow area (I know, because I traded professionally for many years). The better you know your product, the more likely you are to find an edge (whatever it may be). Every product is different and unless you are on top of all the fine details you will never make money. Once you have proven that you can make money in one product, you can diversify and go wherever the best opportunity is. But until then, and for most people that is years down the road from when you start, stick to one product, and try to make one set-up/approach work. It's very difficult and most people are never able to make this happen.
The mistake many retail traders do is to go from product to product, platform to platform, indicator to indicator... constantly looking for that "secret sauce". The only way to become profitable is to focus really hard on one thing. Its tedious and boring. But trading isn't supposed to be fun. Treat it as a business, not a hobby, and think of it as a puzzle. Don't give up until you have either solved it or feel confident you cannot do it. At that point you can move on to a different approach or decide trading isn't for you.
I am swing trader and investor, who trades for his living.
I like having a large tool box. In many years I had to find out that there are times where the one tool works well and times, where the other tool works well. Thus, I trade futures as well as options, grains as well as metals and indices.
In addition, this diversification helps me to get a smoother earnings curve.
Great question. I've been experimenting with this and for me the answer is 2 dissimilar instruments. I trade based on price action, but it doesn't matter as I think we all or most have our own set of trading rules and discipline. For me a third instrument distracts from my ability to focus and do my best to understand what the markets are telling me. I know lots of traders that trade only one instrument. To make more money, increase your size when your account is the right size to take the risk. Trading requires patience, which can be boring. I take about 2-5 trades per day per instrument. For me, the trick to making trading a successful business is to avoid losing trades.
