Better to be Wide or Deep?

[jinxu]

You are basically asking if you could multitask manage a couple of instruments? You're a smart guy. What does the current research on multitasking say. Like someone said jack of all trade means master of none.

 

[Xela]

So is it better to scan over a large universe of available instrument to look for YOUR trading pattern and catch them using some kind of technical scanners. Or is it better to trade just one instrument waiting for your technical pattern.

I don't use "technical scanners", but I share your perceptions on this subject, really. The more "specialist"/"rare" your specific pattern is, the more it makes sense to be able to look at other instruments, too, because otherwise you'll just be sitting on your hands all day (or, in my case, just playing backgammon online)?

I have a small range of "patterns", some of which are very similar to each other, anyway. I look at CL when I can't trade NQ, and at E6/B6 when I can't trade CL either. (I probably ought to look at more instruments, too - and it certainly makes much more sense for me to do that than to look for additional "patterns"/"trading-styles".)

Because what I noticed sometimes is that the index might not be moving at all on a slow day, but there's always something moving in the market every single day!

Why not get into those that satisfy your conditions?

I agree with this.

To make it even more extreme. Let's say you are really good with just one pattern that seems to be high probability. You've tested and trade sim it. But today in your chosen instrument that high probability pattern is not there. But you know for sure that there's somewhere in the market there are instruments that follow your particular high prob pattern. Why not seek them out?

Again, I broadly agree with you.

 

[Handle123]

If you've traded long enough then you'll eventually find some good repeating technical patterns that seems to be somewhat consistent. Then the trick becomes recognize that pattern in REAL-TIME and eliminating the false positives.

I've been practicing on simulator a few patterns that seem to be consistent.

Anyhow, long story short do you find it's better to be wide or deep? Let me explain. Is it better to to look for as many different instruments that match your particular successful pattern? I.e. using technical pattern scanners. Scan thousands of stock symbols and you get a bunch of them. Of course, there will be some false positive. Eliminate them if you can.

Or do you focus on one instrument like the NQ,ES, YM etc and just wait for your setup and pattern to come.

I realize the richness(in terms of complexity) of intraday trading is amazingly deep! In a week you probably seen hundreds of patterns that would take a long-term trade years to get to. If you practice on an accelerated pace spanning months of data across different market environment you get a lot of exposure!

I've been focusing narrowly on index futures because I like the way futures trade.

But if I were to be honest and data driven, index futures have not been net profitable to me. Yes, I had great and amazing days. But net net it has been negative P&L experience.

Ironically though I don't trade stocks much but when I do it's because it meets a certain particular high probability pattern. And I would buy or short and hold.

So, do you guys think in your experience is is better to scan for your high probability patterns across wider universe or do you focus on mastering the minutiae of one instrument to be more profitable.

Or perhaps the success in stocks is being more selective and holding longer whereas index futures is mostly daytrading which needs a lot of moving in and out and fast reactions.

Just trying to decouple these influences.

I believe it depends on the pattern and how much leverage you are using on the futures, let's face reality, if one is using 90% of one's account, one is controlling a great deal more in futures than stocks dollar wise even if you are margining stocks. So then is also comes down that certain types of patterns that work in stocks don't always work in futures. And why you might ask? Futures were designed to be a hedge for farmers and commercials, and I have always felt futures trade differently than stocks, but since I can't test feelings, I go by stats of back testing.

Unless you have developed a good program to scan thousands of stocks and it is automated, for any timeframe one is wasting their time doing wide, your eyes will miss most of them even if just the dow 30, if however you have programmed, why not if your backtesting shows 20% or lower loss. Between slippage, fees, and losses, I believe 20% losing percentage or lower is required if reward/risk are the same. If stats show more reward to risk, percentages can be larger for loss.

But if your question is of longer term stocks and day trading Indexes, this is completely different, much has to be honestly answered of your personality and learning curve, easier to learn to trade stocks longer term because you most likely have a day job and can wait it out longer to see if trade is profitable plus you can hedge it easier. Whereas between scalping patterns and day trading of doing deep each can be very consistent and profitable. But this takes time for most who trade them, one reason it is harder is one has to memorize all the rules and patterns that show pattern is breaking down and exit faster than longer term stocks.

I think where most seldom consider and can do well is long term commodities, make much more than long term stocks cause of the margin requirements, and far less fees and pretty close to profits compared to scalping/day trading. But far less risk which allows for trading more quantity when one hedges.

...

70% of my own trading is on one instrument (NQ), and the selection of the three others I routinely trade (CL, E6 and B6) was determined largely by my own background as a trader rather than (for example) by looking at dozens of different instruments and deliberately selecting them for any particular attributes (though these two possible methods of instrument-selection do actually overlap to some extent). You could call that "wide", in a sense ... or at least not "very narrow"...

Xela, what happens when you trading OPM and they increase accounts or size to ten or even one hundred times the amount to now? And your favorite NQ's do have limits of how much can you can safely trade and still exit without huge slippage? You might want to start practicing more on the ES.

There are limits on futures, not discussing exchange limits, you can't swing huge amounts at lunch without paying the price. Yes, I know this is retail forum and most only dream of trading larger, but very few here who are profitable want to stay at same lot size to make five figures all their lives. That only breakevens on your existence at home, but to save for a future or other businesses to start, one will have to keep bumping up size.

As far as "wide or deep", ask Buffet or Jim Rogers. Also, consider quality of life, you want more of a normal life and spend time elsewhere, or is life no better than playing this game?

 

[Sprout]

You are basically asking if you could multitask manage a couple of instruments? You're a smart guy. What does the current research on multitasking say. Like someone said jack of all trade means master of none.

Often shortened and misquoted, the original phrase "Jack of all trades, master of none, but better than a master of one" implies the advantage a generalist has towards integrating underlying principals of various domains than a specialist would have in a similar process of integration.

 

[Xela]

Xela, what happens when you trading OPM and they increase accounts or size to ten or even one hundred times the amount to now?

Sorry, I don't quite know what you mean, there, Handle: can you give me an example of what you mean?

And your favorite NQ's do have limits of how much can you can safely trade and still exit without huge slippage?

Very much so. This is my biggest problem.

You might want to start practicing more on the ES.

Exactly what I've been telling myself.

The reasons I haven't, really, yet, are (a) the last three months have been something of a "purple patch" for me anyway, and (b) others trade ES (though that doesn't prevent me from trading it, too) ... but clearly you're right. I didn't like the look of ES, by comparison, for most of 2016/17, but it does look a lot more suitable for me now, really ...

 

[jinxu]

Often shortened and misquoted, the original phrase "Jack of all trades, master of none, but better than a master of one" implies the advantage a generalist has towards integrating underlying principals of various domains than a specialist would have in a similar process of integration.

Maybe. But I was using the quote in the context that it's harder to full focus on multiple tasks at the same time as efficiently as you would be able to.

Also it's hard to be a master of anything if you spread your focus on everything. People want to hire masters not jacks. Jacks can work the low level jobs. Master experts get pay the big dollar.

And consider the phenomenon that being strong at one thing means being weak in another thing as the skills counter each other.

Take this for example. I'm an engineer from schooling. When I started focusing on trading, I notice that as my trading skill develop, my engineering still weaken. I can still do engineering but not as good as before. I suspect the reason is the trading skills needed are counter with the skills needed for engineering. Strange phenomenon but true.

So, no wonder so many engineers are bad at trading. They don't have the skill.

 

[Handle123]

Sorry, I don't quite know what you mean, there, Handle: can you give me an example of what you mean?
...

Say what you are trading OPM is one million, and you doing well, and whatever company you working adds to your account 100 million account size after a year, are you going to be able to bump your size in NQ's or 6e/6b to reflect new size? This will happen to you as I know you are very decent trader. I been studying this past 17 months, how and what to trade as OPM increases, duration intraday and how to control risk. Almost unlimited first hour size, but must drop size after day sessions first hour whether in Indexes or coffee or any market, oh coffee outstanding day trading market but can't do size and options very thin and spreads wide.

One way to do size in NQs, making sure both the ES/NQ trending same for the day and legging into spreads for more of a day trading position than semi scalping, and if it is good at the close, you can hedge each side so you don't have to watch it over night. You also have to figure out right balance of so many ES contracts and so many NQs. Currency futures are tough as well.

Perhaps you have traded soybeans or studied them, many different kinds of spreads between the complex of soybeans, soybean meal and soybean oil. Spreads have much reduced margins for overnight and some good patterns (line patterns of subtracting one market from the other)(also, specialized programming you can have bars charts) during the intraday good kicks of profit.

Xela, ES is much less forgiving that NQs, but you have solid background on risk management and no matter what ES shows, you would do well.

 

[Sprout]

Hi All,

Thank you for all of your thoughtful comments and opinions! Much appreciated. I realized I phrase the question wrong. Or not as clearly.

What I really really wanted to ask was this. Suppose you've mastered a couple of trading patterns. For example, you are good at identifying breakouts either up or down. Like you are more right than wrong in identifying breakouts. I'm just using breakouts as an example of a pattern. Doesn't necessarily need to be that pattern.

So is it better to scan over a large universe of available instrument to look for YOUR trading pattern and catch them using some kind of technical scanners. Or is it better to trade just one instrument waiting for your technical pattern.

Because what I noticed sometimes is that the index might not be moving at all on a slow day, but there's always something moving in the market every single day!

Why not get into those that satisfy your conditions?

I think it makes sense. To make it even more extreme. Let's say you are really good with just one pattern that seems to be high probability. You've tested and trade sim it. But today in your chosen instrument that high probability pattern is not there. But you know for sure that there's somewhere in the market there are instruments that follow your particular high prob pattern. Why not seek them out? Or you think it's better to not trade that day since the pattern is not there.

The risk I see is even though it might follow your pattern there are micromarket issues. Like for example the bid-ask is too wide. So you gotta learn how to enter that vs futures where for the most part the bid-ask is narrow.

I definitely will continue to trade index futures and practice that on sim to help me hone my pattern recognition skills.

In terms of pattern recognition,
wide is better for equities, deep is better for futures.
Having depth, one can go wide. Having width, one can go deep. Both contain an informative perspective that the other does not.

To go deeper with pattern recognition apply MADA by annotating, logging and debriefing on the 5min index future.

For me, besides the capital advantage, deep is better simply from the calibration perspective. Hopping between many instruments, especially if they are not already part of a high quality pre-screened personal universe of stocks, makes subconscious calibration between scales, wide spreads/thin books and thus interpretation of volume pace more difficult. Also, tax time with day trading equities/washsales is more a headache when compared to futures.

The source of all reliable repeating patterns is the PV relationship which is more easily seen in liquid markets with a thick order book.

 

[Handle123]

Maybe. But I was using the quote in the context that it's harder to full focus on multiple tasks at the same time as efficiently as you would be able to.

Also it's hard to be a master of anything if you spread your focus on everything. People want to hire masters not jacks. Jacks can work the low level jobs. Master experts get pay the big dollar.

And consider the phenomenon that being strong at one thing means being weak in another thing as the skills counter each other.

Take this for example. I'm an engineer from schooling. When I started focusing on trading, I notice that as my trading skill develop, my engineering still weaken. I can still do engineering but not as good as before. I suspect the reason is the trading skills needed are counter with the skills needed for engineering. Strange phenomenon but true.

So, no wonder so many engineers are bad at trading. They don't have the skill.

I think the "Masters" can trade any timeframe and any market, and why they are masters of trading/make the biggest bucks. Longer you stay playing the game, you get to witness your evolution, game gets easier as you memorize less, what you might have thought was very important isn't and what you thought was not needed is most important. Really take decades to prove to yourself of your capabilities might be unlimited, but have to keep working at it, easy to forget especially if you have gotten into automation, you have to continue to "play the game" on charts to not lose what took years to understand. You constantly teaching your brain what you are seeking so the brain is selecting certain criteria setups so you can back test them, when brain gets pretty good at it, losses turn into more of disappointments than anger as brain after awhile expects to seldom have losses.

If you were doing engineering 30 years, each year that becoming easier as you have learned much and each year require less new memorizing, so you have answers much faster.

 

[zdreg]

I think the "Masters" can trade any timeframe and any market, and why they are masters of trading/make the biggest bucks. Longer you stay playing the game, you get to witness your evolution, game gets easier as you memorize less, what you might have thought was very important isn't and what you thought was not needed is most important. Really take decades to prove to yourself of your capabilities might be unlimited, but have to keep working at it, easy to forget especially if you have gotten into automation, you have to continue to "play the game" on charts to not lose what took years to understand. You constantly teaching your brain what you are seeking so the brain is selecting certain criteria setups so you can back test them, when brain gets pretty good at it, losses turn into more of disappointments than anger as brain after awhile expects to seldom have losses.

If you were doing engineering 30 years, each year that becoming easier as you have learned much and each year require less new memorizing, so you have answers much faster.

it is like black box trading. you need to tweak your algorithm to stay ahead.