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Hi everyone! I would like to know if peofessional traders specialize in trading only one instrument or if they trade more than one. What is the wisest thing to do from a daytrading perspective. Cheers!
Personally (and professionally), I have become a believer in diversification. I am primarily a swing trader and work in the intermediate timeframes, with some longer and shorter term stuff thrown in for fun. Diversification allows me to smooth my equity curve (overall P&L if you will) and more easily absorb drawdowns. I try to build a portfolio of systems that have low correlation to each other.
As a day trader, I think the perspective changes. There are a few schools of thought (and I look forward to other's perspectives): specialize and get really good in one market/instrument. Or....diversify and get good enough in a basket of non-correlated instruments you can work with. I have one system I am developing that is a day trading system that only works on one instrument. It has a lot of potential and I may have an edge. If I were day trading this and it is my cash cow system, but at some point the market will change and I'm flat or bleeding out. I need to diversify to stay alive.
I know there are people who like to just focus on the index futures and that is it. There is high correlation there, typically, so it does not meet my criteria of diversification. Day trading multiple non-correlated instruments would be the way to go, I think. One of the systems I am building is for stocks (not my strong area for short-term trading), which meets the diversification criteria if I am trading across different market sectors.
For those traders who work at a firm, there may be a focus only on one market (energies) or instrument (Crude Light). I am sure that is dictated by their bosses and it may be driven as much by hedging as it may be for profit (think of an airline hedging crude). For those trading for a living, then things open up a bit and I think diversification can be important. I keep hearing 'diversification' from the pros.
I believe successful professionals trade only one or very few instruments.
I day trade (or scalp, depending of your definition) the mini Dow and the US Treasury 30y. I also swing trade the mini S&P500 and sometimes the US Treasury 30y.
That is it!
I used to day and swing trade options, futures and also stocks and ETFs.. At the time I knew all about technical analysis. I used to trade earnings and all kind of events.
At the end, being specialized in one or two products was the key for me.
Hope this helps.
I used to trade many different instruments like ES, YM, NQ, RTY, CL, GC, SI, HG, NG, ZS, UB etc., but as my trading grew 'more serious' over the years, I found out that I can't focus on more than max. two instruments simultaneously.
I experienced as well that it's essential to find THE market which fits best to your own personality and psyche.
And over time, you get to know the 'true character' of this particular market and become REALLY good at it.
So I stick with NQ, and from my own experience, focussing on only one instrument was the key and a game changer for me on my way to consistency.
"If you don't design your own life plan, chances are you'll fall into someone else's plan. And guess what they have planned for you? Not much." - Jim Rohn
Thank you for taking the time to answer my question. I completely understand where you're coming from. One of the drawbacks of diversification, IMO, is that you tend to lose focus. I think it'd be better to be hyperfocused in just one thing (from a daytrader perspective). Due to the fact that you are swing trading, it makes perfect sense to diversify. Cheers!
I think many years ago when there wasn't as much data available to write scripts and algos you had to specialize. You would never have to time to track down opportunities in other markets. Now we can run scripts across multiple markets and find opportunities within seconds.
