I review 2 approaches to trading below.
In this approach, the trader scans many markets for the best trades, ranks the best trades, and only takes the best trades in the best markets. This approach is often adopted by professional equity traders.
For example, this last week I found that Natty/Natural Gas was making a lot of sense for me. It was respecting technical levels, and I felt the market showed a clear intent as to the purpose. I don’t know anything about Natural Gas but the market was making sense to me.
While individual variations exist, the basic approach can be summarized:
Trader employing this approach will typically specialize on a single market. The trader will typically attempt to get into trades with very tight risk. They may look for one or more setups or trade with discretion. Trader may focus on a specific bar or chart type, i.e. 10 range bars or 5k volume bars.
While not exclusive to single market approaches, the multi-shot or scalping entry approach is more common with single market traders and the biggest benefit is that if your standard deviation per trade is high– then you might be able to scalp out the expected value easier then achieving the expected value in statistically reliable terms. However that’s also the danger because you can lose a lot more too.
While previously a proponent of the single market focus, I think I have officially shifted too favoring the multi-market approach and am more skeptical of single market focused traders. I would hazard that majority of professionals are multi-market traders whereas single market focused participants seem to more often struggle. That’s not to say there aren’t those focused on single markets that can do well for a while– its just over the longer term that it seems less common.
So, my advice if you are a new trader– try to learn one market well but also try to expand out as fast as possible to being able to trade several markets. I think it is similar to systems– there simply are not any trading systems I could ever trust with all my capital. So why trust one market to produce for you?
The author is passionate about markets. He has developed top ranked futures strategies. His core focus is (1) applying machine learning and developing systematic strategies, and (2) solving the toughest problems of discretionary trading by applying quantitative tools, machine learning, and performance discipline. You can contact the author at firstname.lastname@example.org.
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