Today, I plan to share the investment insights Benjamin Graham, Warren Buffet’s mentor, gleane...
Good Reasons to Trade Multiple Markets
10/14/2011 3:30 pm EST
Some traders believe finding and sticking to only one market is the key to success, but Travis McKenzie says that by trading multiple markets, you’ll always have a good trend to trade.
I am speaking with Travis McKenzie, and Travis, you think that traders should look at several markets instead of focusing on just one, why?
Exactly right. The biggest reason that I say that is because I meet a lot of traders who I call “breakeven traders;” in a sense, they might have been trading for two, three, or four years, and they are not losing money, but they are not making money either.
When I dig a little bit deeper, it normally comes to the surface that they are only trading one market.
So say, for example, they are just trading the euro/dollar, or it could be the mini Dow, or it could be anything. When that market is trending, they tend to make a lot of money. The market then goes into a period of consolidation; they tend to give all that money back, plus a little bit more. When it starts trending again, they make money, and the circle goes around, around, and around.
So two to three years go by and they are not making money. What I encourage the people I teach to trade is to use those strategies you have got, but look across a wide range of markets. Let’s find the markets that are trending the best right now, because everyone knows that a trending market is by far the easiest market to trade. So let’s find the trending markets and let’s trade those.
I encourage people to have strategies they can apply in any market and any time frame. I think it is a very important area.
Sometimes we get all markets that go the same way, and it might not be a trend, it might be just sideways; can you still use that strategy?
That is a good point; most people say that. Say, for example, with the stock market, you have got the top 500 S&P companies in the stock market; you could go through a period of consolidation or volatility on the overall markets, but I can guarantee you out of those 500 stocks, there will be a good 10% that will still be trending.
The same with futures: there will be a number of futures that will be consolidating, but there’s always something out there that is trending. Trust me, they will be.
Should they be related markets or have no correlation whatsoever?
Well, I am a big believer a chart is a chart, so the way I trade a futures market would be exactly the way I trade commodities. For me, it doesn’t really matter.
You want to be careful if they are too highly correlated. For example, using forex as an example, you don’t want to be long euro/dollar and long pound/dollar because if the dollar moves, they are both going to move very closely correlated. So you have to be careful about that; that is for sure.
See related: Tips for Trading Correlated Markets
So you do have to know what the relationship is?
Yes, to a degree.
To a degree, but look at several markets and not just focus on one to open up your opportunities.
Definitely. That is why if you make sure your strategies work in any market and any time frame, you will be able to do that quite easily.
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