If You Trade One Instrument Only, How Do You Deal With This?

Swan Noir · Nov 11, 2013

If you are non-automated this is where the money is.

Quote from grahamglover:

I think it better to crush one market and be OK with a losing day.. assuming you have a consistently profitable edge over all.

NoDoji · Nov 11, 2013

I have a profitable method based on pure price action, so for me it made the most sense to find instruments that offered the most intraday opportunities (I don't hold overnight). I found CL to offer the most opportunities and built my trading plan around it.

There's nothing to deal with if your methods are based on price action. Price moves every day.

k p · Nov 12, 2013

Quote from NoDoji:

I have a profitable method based on pure price action, so for me it made the most sense to find instruments that offered the most intraday opportunities (I don't hold overnight). I found CL to offer the most opportunities and built my trading plan around it.

There's nothing to deal with if your methods are based on price action. Price moves every day.

I was under the assumption NoDoji that you were mostly trading the ES. I think you said bighog turned you on to futures... but I thought it was ES not Oil.

Oh.. and I have a side question to ask if I may. Back during your journal days, you were trading fairly large positions in stocks since you clearly needed to trade enough shares to make small moves in prices give you a decent profit. But now if you are onto futures, the requirements for capital in an account for each contract are quite small. So do you mind if I ask where you park your money? I doubt a day trader wants to hold stocks or even indexes long term... so I'm just curious to ask what a day trader would do with capital that isn't needed for day to day trades. Thanks!

Stockie · Nov 12, 2013

Another aspect is emotional diversification (or averaging).

Three losers in row on a single instrument can be emotionally more difficult than three losers out of ten concurrent positions.

Stockie · Nov 12, 2013

Quote from Swan Noir:

I trade only CL and not only is it not a problem to trade a single instrument it is an advantage. That said, I'm speaking from the prospective of a discretionary trader that would have a hard or even impossible time trading a basket.

I'll guess you are automated and, if that is the case, diversification has its advantages. For those of us running it by hand, a single point of focus generally will outperform splitting our concentration and energy over multiple instruments.

I'm not generally into sub hourly time frames, but would consider it and had thought 2-3 instruments would be a manageable number!

Did you try trading a second instrument and find you were less profitable overall?

Swan Noir · Nov 12, 2013

It took me thousands of hours of screen time to become consistently profitable in a single instrument. I started, as many do, with ES and while I had profitable runs consistent profits eluded me. That said, the time I spent trading ES had its value.

CL, as you know, is truly a horse of a different color and one that suits me. I'm consistently profitable and continue to observe and learn new things. I not only don't trade anything else I don't even have any other charts up. During the trading day, I don't listen to news nor do I have any idea what equities, gold or the bonds are trading at ... or if they are up or down.

I believe everything I need to know about crude is right on the screen and I also believe no matter how long I trade CL the weakness will be my ability to interpert the PA ... there will always be more to learn and there will always be nuance and "feel" to master. CL, of course, has size limitations. If and when I find that I am bumping up against that reality I many be forced to look at other instruments but, unfortunately, I'm not in that position. I look forward to being there someday.

Quote from Stockie:

I'm not generally into sub hourly time frames, but would consider it and had thought 2-3 instruments would be a manageable number!

Did you try trading a second instrument and find you were less profitable overall?

Stockie · Nov 12, 2013

Insightful, thank you. I'm with you on ignoring (most) news and other markets. Too often I've drawn the wrong conclusions from these.

Quote from Swan Noir:

It took me thousands of hours of screen time to become consistently profitable in a single instrument. I started, as many do, with ES and while I had profitable runs consistent profits eluded me. That said, the time I spent trading ES had its value.

CL, as you know, is truly a horse of a different color and one that suits me. I'm consistently profitable and continue to observe and learn new things. I not only don't trade anything else I don't even have any other charts up. During the trading day, I don't listen to news nor do I have any idea what equities, gold or the bonds are trading at ... or if they are up or down.

I believe everything I need to know about crude is right on the screen and I also believe no matter how long I trade CL the weakness will be my ability to interpert the PA ... there will always be more to learn and there will always be nuance and "feel" to master. CL, of course, has size limitations. If and when I find that I am bumping up against that reality I many be forced to look at other instrument but, unfortunately, I'm not in that position. I look forward to being there someday.

NoDoji · Nov 12, 2013

Quote from k p:

I was under the assumption NoDoji that you were mostly trading the ES. I think you said bighog turned you on to futures... but I thought it was ES not Oil.

Oh.. and I have a side question to ask if I may. Back during your journal days, you were trading fairly large positions in stocks since you clearly needed to trade enough shares to make small moves in prices give you a decent profit. But now if you are onto futures, the requirements for capital in an account for each contract are quite small. So do you mind if I ask where you park your money? I doubt a day trader wants to hold stocks or even indexes long term... so I'm just curious to ask what a day trader would do with capital that isn't needed for day to day trades. Thanks!

When I started out day trading I traded 1000 shares of whatever. If the stock was really expensive ($200+/share) then I'd trade a bit smaller. I was a noob with some good clues but no idea what a trading plan was.

I park my money in an account which I swing trade and keep a few long term positions.

k p · Nov 12, 2013

Quote from NoDoji:

When I started out day trading I traded 1000 shares of whatever. If the stock was really expensive ($200+/share) then I'd trade a bit smaller. I was a noob with some good clues but no idea what a trading plan was.

I park my money in an account which I swing trade and keep a few long term positions.

Thanks so much for the answer! I realize it might have been too much of a personal question but I wondered what a day trader would do if they had a sizeable amount of money since the day trader I would imagine wouldn't want to hold anything over night for fear of bad news and a major drop.

So what you're saying is don't follow anything in your trading journal from 2010?? LOL

May I ask why you choose to trade CL? My buddy was trading Russell 2000 and its interesting to look at the chart. It doesn't have the same look as most other charts with candle sticks in all sorts of sizes and both short and long wicks. It seems to either just move up, or down, and it does it fluidly if that makes any sense. Of course I have no idea what I'm talking about, but from my uninformed opinion, the chart of the Russell 2000 looks easier to trade than the sporadic nature of the ES or most other stocks out there.

Visaria · Nov 12, 2013

Russell is better than ES in some regards. For one thing the spread is only 1 tick i.e. 0.1 compared to 0.25 for ES. I guess people here prefer ES because of the deeper liquidity and depth. But that shouldn't be an issue since i doubt if anyone here trades in hundred of contracts in a clip.

The main attraction with day trading CL is its daily range. Still quite large, about 170 cents a day on average. Used to be 200-300 a couple of years ago.