How Many Symbols to Trade at Once

09/24/2014 6:00 am EST

Focus: STRATEGIES

Austin Passamonte of Coiled Markets outlines how the markets have changed through the years and why he has decided to stop focusing on multiple symbols and focus on just one instead.

One of the most common email questions I get inquires if our method of trading will/will not work with fill-in-blank symbol or market. There is only one possible answer to that and it would be yes...our price action based trading approach works in any moving market.

Big picture: markets are markets. There is no difference between any of them when they are moving up, down, or both. The same principles of price action and behavior apply to all. Only differences are open interest—aka true liquidity—available for consistent trade size. Some markets are simply far more liquid than others. But all markets adhere to the same universal laws of contractions and expansions alike.

More than One(ce)

Through the bulk of my career in trading, I’ve been a proponent of working with multiple symbols at once. From options to forex to futures and around, I have most always tried to juggle two or more trading instruments at any given time. I think that seemed most logical (and also appealed to my own personal traits of attention deficit as well). But is it, in fact, true that trading multiple symbols and/or markets offers the greatest potential profit?

When I began trading a decade ago, it was with equity and index option contracts. I was not a designed day trader…seldom did I open and close a position intra-day. I had no intention of turning trades quickly by design, although at times when extremely favorable price movement happened, I was grateful to take advantage of that. For the most part, my trading activity stretched across days—if not weeks—of actual hold times for trades.

As I transitioned to futures and forex markets next, my average hold times for trades lasted for several hours, if not overnight into the next session or two. I was still in swing trading mode, seeking +20 index points (not ticks, whole points) in the ES and/or +100 to 200+ pips in FX symbols…per contract. Back then all markets had much greater average price ranges and smoother oscillations up and down through the process.

Faster Pace

As time went on, all financial markets changed. The past era of big, deliberate price swings evolved into the present time of contracted markets, extended sideways volatility with brief spates of abrupt directional spikes and slams. Now it is rare to hold any short-term position for hours or days in duration. Sideways and countertrend price moves are such that deliberate price swings from high to low or low to high points in the past are now extreme noise gyrations in between.

All financial markets are much thinner now than in times past when it comes to real, true liquidity. Volume and open interest across all markets used to be dispersed across a far greater number of participants before than are currently active today. So deliberate has been replaced with abrupt because of that evolution.

NEXT PAGE: Chasing the Rabbit(s)

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Personal Traits

“Know thyself” is as important a task in trading as any other individual performance pursuit. In my case, I have a rather short attention span unless the subject absolutely fascinates me. Which is why staring at modern day ES futures chopping through a six-point range for hours at a time is a form of mental torture for me. Many traders find that type of (in)action preferable. To each our own.

Slow, go-nowhere, chop and churn markets are not my cup of tea. I highly doubt they appeal to most individual traders, either. Volatility, price range, and liquidity are the cornerstones of profit potential. The greater distances price will move equals the more favorable risk-to-reward ratios are.

Increased Attention

What I have found through the years—in myself and also with other traders—is the natural trait to pay more attention towards choppy symbols and less attention to deliberate ones when working more than one market at a time. Basic human nature…we try to fix what is not working right and assume what is working well will do so on its own. So, in other words, we tend to focus more on trying to make gains out of the worst performing symbols at any given time because that’s where the struggle to profit from—or win—is found.

You know what else I have found? Opting to focus on a single market or symbol makes me more efficient with that symbol overall. More importantly, it tends to make me more successful overall. No longer am I languishing and anguishing over whichever tape is acting poorly at the time. Now I am focused with laser sharpness on what is working well when price action there is working best.

I don’t know if it’s ideal for everyone else, but I’m pretty sure it is best for many others to pick one market/symbol and focus with precision on that. If you find yourself struggling to manage more than one symbol, stop trying to do so. If you catch yourself thinking/saying things like, “I missed that move here while distracted over there” then you just caught yourself missing out on easier money. Didn’t you?

There’s an old saying that predates anyone reading these words that goes, “If you chase two rabbits, you’ll catch neither.”

By Austin Passamonte of Coiled Markets

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