This article identifies a severely under discussed issue. One that may have, until now, been a source of confusion to many aspiring traders. So let’s attempt to answer this critically important question with some “old fashioned” common sense.
Basically; should you trade in different, random markets?
The short answer is: It’s your call. Trade whatever you want!
The longer answer, which is also your call, requires consideration.
Trading random markets simultaneously is no easy task. To become truly familiar with each market the trader must spend hours, days, or weeks reviewing the price chart, studying fundamental data, understand earnings movements, reviewing volatility, and the list goes on and on.
But how do most of us trade? Be honest…we slap a few indicators on the screen, scan for price at some arbitrary level, then fire off a trade without hesitation.
Trading this way can be dangerous, I too have traded options in this manner and truthfully I’m guilty it more often then I care to admit. It’s quicker to identify a chart, perform an analysis, and make a play than it is to wait patiently day after day for a setup.
In other words, the alternative is boring. But know this, boring makes money, I’m confident in that. I know it isn’t what any of us want to hear but it’s the truth.
A better alternative to trading random markets
Now, what I suggest instead is to become familiar with several charts so you’re no longer looking at random markets and attempting to trade from the hip. At this point you’ll have maybe 5 – 10 capable assets, all of which meet your criteria. Criteria such as, share price, average daily range, option liquidity, elevated or deflated volatility, etc. Whichever measure is important to you is what counts. In the end, your left with several tradeable underlying assets.
Familiarity with different markets or different companies has a number of benefits. To name a few, you’ll be able to identify news events that could affect your chosen market(s), you’ll gain a “feel” for the state of your market (this benefit is indescribable, but immensely valuable), you’ll understand which of your chosen markets move with and against the overall market, and many more advantages that will serve well.
Here is an article I found discussing trading multiple markets, notice I didn’t say random markets, that I believe will highlight further the benefit of a deeper understanding of elected assets. Also, consider this previous post.
In my opinion, its the easiest thing to change that can improve trading results immediately. Yet everywhere I turn its the same story about trading random markets.
Trade smarter. Trade markets that fit you.
Jeff “the OptionBoxer”
