I have a guy that lives down the street from me that I’ve used to tack down loose floorboards, repair cracks in my driveway, clean the gunk out of my gutters and much more. He makes a decent living doing such odd jobs and has a vast knowledge of many things. However, depth of knowledge in any one area is lacking. When I recently had a water heater die on me I thought about calling him then realized I’d need a professional–someone who specialized in water heaters who new exactly what needed to be done to meet city codes. I knew I’d pay more for such a person but I also knew the job would be done correctly.
This is a great analogy of market participation. It’s no secret that I believe we function best in the markets when our trading style matches our personality. I further believe that if you really want to have longevity in the markets you need to specialize in an area. I’m not saying you can’t have multiple strategies that you employ, depending on market conditions, but rather a specialization that is your main source of income.
For me it’s selling premium on the SPX. I know the vehicle inside and out, have a good understanding of how it trades and don’t have to stare at screens all day. I have gigabytes of data that I run analysis on, both in price and the option chains, that help me make informed decisions. That is how I make my living in the markets. It matches very well with my personality. However, that doesn’t mean I don’t trade the occasional $AAPL or $IBM for a swing or trade a few $ES_F on a scalp. My point is that those other trades are but a small fraction of my overall market participation.
If you’ve found a way to trade multiple markets in a variety of ways all while managing risk and being profitable for several years, congratulations. You, however, are not the norm. For the vast majority out there that try to trade someone else’s system or strategy may find short-term success but longevity will be unattainable. They’ll soon abandon that strategy and move on to the next only to repeat with similar brevity. They become a jack of all and master of none either losing their trading capital or, like my handyman, grinding out a decent living.
Don’t misunderstand me, there is nothing wrong with making a decent living. But if the handyman isn’t busting his hump at someone’s house he’s not making money. Being successful in the markets is about so much more than the money itself. It’s about freedom and self-reliance as well. Strive to find a system that fits well with your personality and risk tolerance. Become a master at executing your plan. Like a machine!
Once your trade metrics suggest stability over an extended period of time you can move on to other strategies. Build a foundation in order to have longevity in the markets. There’s no better place to make a living than in the markets.