Trade One Market or Many?

11/22/2011 2:30 pm EST

Focus: STRATEGIES

Toni Hansen

President and CEO, Trading From Main Street

Trader Toni Hansen says it’s most important to know the ins and outs of your trading strategy because that provides the basis and flexibility to succeed in one or several different markets.

Some really good traders have different strategies for different markets, and some traders focus on one market their entire career with a specific strategy. Which is the best for you? 

Our guest today is Toni Hansen to talk about how she handles this. So Toni, I know you trade a lot of different markets; do you have different strategies for each one?

Overall, my system is pretty universal, so a lot of the strategies that I use for one market really correspond very well to another market.

There are some exceptions. For example, there are opening plays that I like to take, and momentum stocks, particularly things that are moving on news. So I’ll have a lot of strategies that I can take out right away at the open within the first five minutes or so and look for those really strong momentum moves. 

But overall, a lot of the things that I’m doing are really things that you can trade with whether you’re trading forex or options or futures. 

The way I developed was I started with one market. So I started as a swing trader about 15 years ago, meaning I was looking to hold for several days at a time. I began watching a lot of the intraday charts and I found that I could really improve my system by using set-ups intraday that were going in the direction of those larger daily trends. 

From that, it got me into trading intraday and it introduced me to different set-ups in terms of positioning. I was following the futures market to help as well, and that got me into trading the E-minis. 

I found that the methodology that I was using—which was based on technical analysis and not using a lot of indicators, so I was just watching price action on candlestick charts and volume for the most part—I found that it really didn’t matter so much what markets you were trading.

You wanted be in markets that were fairly liquid and that didn’t have extreme volatility moves from one bar to the next, so you didn’t want something that would be up 50 cents one minute and down 25 and then back up 50. You wanted something that traded really smoothly.

That became more important than whether it was a currency pair or whether it was an individual stock.

So there’s an argument that when you’re first starting out, focus on one market, learn its behavior really well, and once you’re successful there, move on. What are your thoughts on that?

I think that more so than focusing upon one market, try to pick out one or two individual strategies and begin there.

Even if you’re just focusing on one market, you need to learn a lot of different strategies to do well in that market or you’re going to spend a lot of time on the sidelines, or you’re going to be going back and forth not really able to focus and hone a particular strategy. 

So start with something simple; let’s say you want to do just a simple breakout type of strategy. There are so many variations of even trading a breakout that when you get into trading, you might not initially be aware of. 

By learning the subtle differences on the breakouts that work versus those that fail, it helps you lead into other additional strategies. So you begin to recognize breakouts that are more likely to fail and you can treat those as reversal strategies and actually get in the opposite direction. 

So I think that’s more important than necessarily saying you want to get to learn the ins and outs of an entire market or an entire stock.

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