Hello Mike,
I hope that my email finds you well. I wanted to get your thoughts on the following:
What works best? Mastering one set up and trading multiple instruments/stocks/etc… or trading multiple set up’s on one instrument/stock? Is this something that depends on the trader?
Your thoughts?
BELLA
Gr8 question!
In my next book The PlayBook, which you can order here, I discuss the future of trading and the path that new, developing, experienced traders should take to pull the most from the markets. I will share some of my thoughts in answering your question.
Generally I am a big fan of leaving this up to each trader. But practically there is a best answer here because of the difficulty in learning a new product.
First determine which setups make the most sense to you. Archive them in what we call your PlayBook. Next take steps that few traders are taking. Obsess about whether you are in ALL of these setups that make the most sense to you. Do you have trading tools that alert you to your best setups? Most traders are trading off of no-edge trading software that does not ensure they are in ALL of their best setups. In this challenging market you must.
Next, are you big enough in your best setups? Develop a structure for you to take on more risk for your best setups. If you are not taking on enough risk with your favorite setups then you are taking on too much risk.
From here dabble in other setups you wish to master. Guys on our desk have been adding high beta stock plays to their quiver. Do this with small size, even as small as 100 shares. See if you can add new setups in your chosen product to complete a well-rounded PlayBook.
From here seek to express your A+ setups in other products. You will need education, coaching and mentoring for this. Some trades will work better in another product than futures for example if you are a futures trader. An example from our desk is trading swing setups. It is easier for some of our guys to trade these plays with options than equities. There is too much temptation to exit their positions with all the intraday ticks from equities.
I hope that helps. Keep working on your trading game!
Please join us for the PlayBook Webinar Series this Thursday at 4:15PM EST. We will discuss: The Technical Trade in High Beta Stocks.
Mike Bellafiore
no relevant positions
One Comment on “One-trick pony in many products or master of one?”
As a futures trader, I’ve always encouraged traders to become a SPECIALIST in the product they trade. If you look at other fields like doctor, lawyer, programming, etc everyone is what? A Specialist. Think about this when you trade a different contract/futures then you are competing against specialist in that product.
I haven’t traded stocks (to any real degree) — so I can’t say much that applies. There is one exception to this rule and that is: if you have a system then its possible to trade more instruments because you’re depending on the system to be the specialist (or the system may try to find small discrepancies among a large group of stocks in case of arbitrage).
Now another strategy to try is to become a specialist in 2-3 instruments and then rotate in some other instruments depending on the characteristics or system.