Wednesday 11 May 2011

Trade One Market or Many

I love trend days. They are easy to trade and  there is less thinking to do. Once you can identify one, all you need to do is get onboard and enjoy the ride.


Yesterday we had a number of markets with trend days down. For example, the euro.


So should we trade just one market and become an expert in its fingerprint? Or should we be watching many markets and waiting for a trend day and then riding the wave to super profitability with lower risk? Maybe we would only actually trade 6 or 7 days a month, but would make a month's worth of profits on those 6 or 7 days.


Driving back to France today. Video post tomorrow.

2 comments:

  1. I think everybody wrestles with these questions at some point. I tried identifying the most profitable days. Over a multi-year "lookback" period, I was not able to identify any meaningful patterns. So I stopped agonizing over whether I should not trade on Monday's or trade small on Thursdays, etc. I tried identifying the most profitable periods during the day and had much more success there -- and that bit has become part of my trading strategy. No trade for the first 45 minutes. Most of my trading in Crude occurs between 10AM and 1130AM EST, and then from 2pm to 330PM EST. For the DAX, it's from 2AM to 245AM EST and then from 10AM to 11AM EST and 230PM to 3PM EST. For the currencies, my time frames are much longer and triggered at all times of the day.

    As for which markets to trade -- my rules tell me to follow those with volatility breakouts, but within certain parameters. For example, I will trade GC, but not SI. And no more than three are best if I'm trading with "rules-based" discretionary methods. If I'm watching more than three, I get a little funny in the head.

    I admire people on Stocktwits who can trade all of them and execute flawlessly. I don't have the attention span or the intellect. Even if I'm executing well, when I take a couple of losses I have to fight my urge to become myopic and vengeful.

    I've recently started to program a couple of automated trading systems for CL and DAX. It has taken a long time to work out the kinks of the methods, but the strategy is roughly in line with what I do manually during the day and seems to be robust enough to trade a broad range of markets. This has opened up possibilities for trading more markets without all the hand-wringing, but I find that I spend a lot of time watching these ATS methods execute as well -- still working on this new paradigm.

    As for what kind of day -- best to learn how to trade all of them. It's been a project of mine for years. Like I said, I'm a little slow. It has taken me the better part of three years just to learn that I can stop and reverse in CL. :)

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  2. Hi el,

    How do you recognize when a trend starts? I have problems handeling the transition periods between trends (ie chop).

    Thx.

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