In any field, whether it’s business, athletics or the arts, the person that masters his or her particular craft is usually looked upon as the best, or at least one of the best at what they do. Thereby, specialization is key for trading success as I will go on to show.
A common thread among these high achievers is that they find their niche and continue to work to better themselves throughout their careers. From an early age, they have a good grasp of what talents they possess, and begin harnessing those strengths before most others are trying to figure out their lot in life. Moreover, those that don’t have exceptional talents simply work harder than their peers to attain exceptional feats.
Another aspect of this success is the highly specialized nature of what they do. In the medical field, for example, it’s not the general practitioner that earns the biggest salary, but rather the oncologist or heart surgeon. In team athletics, the most valuable players are the ones that can perform very specific tasks, such as closing out the game after the starting pitcher begins to falter or simply runs out of gas. We call this person the closer, similar to the salesperson who has the cunning to get a customer to sign on the bottom line where others have failed. In football, the so-called skilled positions garner the multimillion dollar contracts, while the others settle for just hundreds of thousands.
In the world of trading financial markets, this especially holds true: Specialization is Key for Trading Success. I see too many new traders continuously searching for the Holy Grail in different technical indicators, asset classes and strategies, which is fine when one is starting out. However, there comes a time when one must declare a major.
One of the hallmarks of successful traders is that they have a specialty. These folks have either a specific strategy or set of strategies that they have mastered and apply over and over again.
There are two schools of thought on this: One is mastering a technique and scanning the entire universe of asset classes for these specific setups; the other is focusing on a specific sector, asset class or market.
I primarily trade the Futures market because it fits my personality and provides enough opportunities for me and my family. There are other instructors at Online Trading Academy that have different specialties, such as Forex and options.
In the hedge fund world, there are managers that specialize in short selling – they search for overvalued companies and then accumulate large short positions expecting the market will ultimately reflect the true value (much lower) of the company or stock. On the flip side, value managers wait for stocks to get knocked down enough to create a large discount to the company’s intrinsic value before they purchase them. And then there are the technical traders that make buy and sell decisions based solely on the price action of the particular instrument they trade.
When I’m instructing and, specifically, sharing some of my strategies with students, a remark I seem to always get is how simple the techniques are. Some students think they’re too simplistic and don’t believe that it can be that easy. Let me make it very clear though, the strategies may be simple, but it is not easy to make money trading. This, it’s too simple perception can be a problem because these students will find it hard to find a niche. They will always be under the illusion that trading has to be complicated and, therefore, trading success will be elusive. I believe this to be one of the major impediments in traders; inability to stick to a simple strategy and master it. Another barrier is changing their old belief systems, but that’s a whole different challenge.
Case in point: I had a conversation with a student that has been doing well with his trading recently, but is hitting a road block. He is a bit perplexed by recent market action and is puzzled about why the market dropped so much in spite of a great economy. Prior to the selloff, he had become extremely reticent in shorting the market, this in spite of some technical patterns suggesting the contrary. I proposed that he stick to his strategies and continue to hone his skills as an E-mini futures trader. Furthermore, I admonished him to let go of the distractions such as the media, or whatever else was pulling him away from maintaining an objective point of view and executing his strategy. From our last correspondence, he seems to be doing much better.
I encourage everyone to find a niche in the markets and pursue a simple set of rules to achieve the goals that make you feel successful. We know those are different for everybody. Lastly, when I was very young, my grandfather said to me, ‘Find something you love doing, do it better than most and you will never go hungry.’