Trading Where the ACTION Is.

[TheNegotiator 13]

I have been a trader long enough now to see certain markets which were once highly liquid and traded by day traders/locals completely lose their appeal. This can be for economic/mechanical/technical reasons. Markets go through unfashionable periods. Certain products go through low volatility depending on what's happening in the world. Judge for yourself if it has happened to a certain product, but history repeats itself so the question is what to do about it.

 

If you are a day trader and say you look at the ES and maybe YM/NQ/TF in addition, you are effectively a US stock index futures trader. You have no diversity really. I'm not saying these markets could die in terms of liquidity as things stands, but they could also not be WHERE THE ACTION IS. So let's say you finally have succeeded in being profitable. You have become an expert in the markets I just mentioned. But all of a sudden, they are just not really doing too much. You might say that you should adjust your strategies, but really if there is less liquidity in a certain market there will be fewer opportunities and as a result, more competition for those trades.

 

But let's even take out of the equation the possibility of the market you currently trade having a 'lull' or worse. You trade away in your market of choice and think you are okay, until you hear about some fellas trading Oil or Silver making shed loads of money fairly easily. What do you do? Keep on at it? Or hop over to the hot market which you don't 'know' as well and run the risk of it losing its lustre by the time you are more familiar with it? This can even apply to trading on a month by month basis in fact.

 

In truth it is always a difficult thing to judge IMO. I would say that things which are difficult to judge are better handled by those who are prepared to some extent at least for what to do and when to do it.

 

My simple advice is as follows:-

 

1)Use methods to interpret your market of choice which can be applied effectively to anything. If you're not sure how well your methods will hold up, I suggest you do some analysis and see if they do. Of course there will be differences especially if you are looking at say wheat as opposed to you usual trade in Gasoline. But you should get a good feel as to whether there are things which could well work or not.

 

2)Monitor key markets as a way of supporting your own understanding of what you are currently trading. So say the Dollar; Euro; Gold; Crude Oil; Stock Indices; etc. (just an idea to get you started). Just take a look at these markets each day briefly to see what's going on in the overall market. You will be surprised at how much you pick up by looking at them.

 

3) Have a specific plan to get into the markets where the action is. You might want to base this on price movement, or even a marked increase in average daily volume. Then watch this market more closely and trade it small or even simulated to begin with. But there must as with everything in trading, be a plan to cover what to do and when.

 

 

What do you think about this and do you even see it as important?

[Obsidian 10]

When I traded stocks I had a list of companies which I studied well...I would trade those only...

There were times that I tried to dive in the waters that I don't know, usually ended up with a loss...then I never traded an instrument which I didn't know it well...

I trade on forex market now but I still follow that rules...I monitor around 20 pairs and trade those only...If they are not moving, I simply wait...