Being a Generalist - Playing all the markets
Well, it took over 8000 posts, but here it is finally.... the case for not specializing in a particular market. Why did it take so long? Simple, I do not recommend it - specializing is a better way to go IMO. But as our longer term board members know, it is a case of "Do as I say and not as I do" haha!!
To convey all my thoughts on this subject would require me to write a book. Hence, I will try to limit this post to some of the pro's and con's, as well as insights on how to be successful playing all the markets.
As we have talked about many times, we always like to ask "how can we make money off of this" and "what will this news lead to." These are things that one needs to be good at to play multiple markets. If you are good at this style of thinking you may have a chance. Of course you will also have to learn how all the markets available to us now work, margin requirements, brokers you can use....all the things you need to know on any exchange - but you will need to be familiar with MANY.
I can already see that I will be jumping all over the place with this post, so please bear with me.
Keys to being successful here:
Broad knowledge of all markets/exchanges.
Good at "what will this lead to."
Unquenchable desire to gain knowledge - tons of research/reading.
Patience's to start off slowly and acquire more knowledge over time.
Having some "bread and butter" plays to keep you going while you expand - specializing first (so for example you can trade ABC and DEF routinely to keep grabbing small % winners)
Willing and able to have trading dominate your life.
Willing to change sleep patterns to facilitate overseas mrkt opportunities.
Good TA and FA skills.
Again, patience as it will take time.
Big time hardware/software.
Be constantly aware of the "big picture".
Money management skills.
Ability to identify trends, patterns and "tipping points."
Don't limit yourself to domestic thinking or mrkts.
Something you will find is that there will be many more opportunities for "home runs" as you will be open to play anything that is looking to make a big move, up or down. While this will bring some huge profits along the way, it can be a downfall as folks start to just focus on the big play missing many smaller plays that provide us our winner after winner scenario which is the key to long term success.
You will also, over time, come to be better at picking longer term trades as these markets overlap and do some degree or another, all affect each other. As you have seen before we have talked about how grain prices can affect oil or fertilizer companies, tire manufacturers, or how currency prices may change outlooks for mining equipment companies. I do suggest that folks specialize but with this more generalist mindset, as things are all connected and this will continue to become more true over time just as the world is growing ever more connected.
You will need to realize when a particular mrkt is one you should stay clear of for a period of time, as I have done recently with the currency mrkt. As I do not trade them full time, and with the currency wars that were going on, I need to stay away and let those specialists have it. You must be able to know when it is time to play what. Personally, I like commodities, stocks and options currently - though of course I can change my mind in a heartbeat. Being able to know when to sit out will be crucial to success here.
I have often talked about "knowing yourself" and what abilities/short comings you have. This is even more important here. Let's say you have been specializing in junior miners. Probably there are not a bunch of plays that you missed....but you did miss some. If you are the kind of person who lets this keep on bothering you, then you won't make it as a generalist, as you will always be missing plays as the number of possibilities will be exponential. Also, let me mention that since you will have more demands on your time, making your decision process streamlined for your TA is very important. Limiting your indicators and having a routine is very important. Also please know that you will be more successful in the long run if you go with the move and don't worry about getting the bottoms and tops....but good news is you will be able to identify more winners.
As I started out saying - too much to go over here...need a book! But I hope it all gives some insight into this approach.
But I still say it is better to specialize, and if this post can help you do it better then I am pleased!!!!
Questions?
Comments?
