Stocks & Commodities V. 31:4 (48): Futures For You by Carley Garner

Futures For You by Carley Garner

FOCUS ON ONE MARKET OR SEVERAL?

Should I focus on one market, or scan several markets for opportunities?

The answer to this question largely depends on the strategy used and the time frame you are trading in. For instance, a daytrader is likely to have developed specific technical trading guidelines to trigger entry and exit signals. However, not all markets are created equally — and what works in one may not work in another.

Accordingly, to daytrade multiple markets it might be necessary to implement slightly different trading parameters for each symbol traded. In addition, it can often be difficult to follow multiple markets on short time frames. Unlike position traders, the difference between profit and loss for a daytrader can be a few short minutes, or even seconds. On the other hand, a position trader, particularly an option trader, would likely find an advantage in the ability to diversify his speculations among multiple markets. Unlike daytraders, position traders have the luxury of having ample reaction time and less hands-on monitoring. Therefore, a position trader can likely monitor a handful of markets simultaneously.

Although it is clear that personality, natural talent, and the ability to focus all play a part in whether a trader can be successful across multiple asset classes, as a rule of thumb, daytraders should limit themselves to a couple of markets. Position traders, on the other hand, should consider any liquid commodity market fair game. Obviously, the term liquid is ambiguous, but the idea is that you should refrain from trading option markets with wide bid-ask spreads such as lumber and copper. Likewise, futures markets that see daily volume below about 30,000 should be traded sparingly.