So do You Specialize or Not?

Písmo: A ++ A --

Before you start thinking of some trading program of yours, you may want to select one area of specialization. One way to do this is to limit yourself to one type of commodity: the grains, metals, meats, etc. A meat trader, for instance then concentrates just on cattle, bellies and hoggies. Or a trader specializing in world commodities might limit his trading efforts on sugar, cocoa and coffee markets.

I know of quite a number of folks, trading this way.

When you limit yourself to a commodity group, you will be able to use the same general body of knowledge in your analysis of each commodity. In addition, this group approach should provide you with ample opportunities for trades, the reason being at least one commodity in a group will be moving even if the others are inactive. And you need not be overwhelmed by the amount of knowledge and analysis required to trade a given commodity group, simply because there are usually one or two limited issues on which the price turns in a particular situation. Thats the conclusion of my being around (this biz) up to date.

As a rule, since supply factors are more readily known than are demand factors, IMHO it is best to concentrate on knowing the potential demand changes and their impact. (The principle is to challenge the markets where they are weakest).

You can also specialize by limiting yourself to a specific kind of trading. You may want to concentrate on spreads, for instance, or you may want to limit your participation to day trading. After some experimentation, many traders adopt a style of trading that suits them best. You have to decide on your own style.

Do you feel comfortable with position trading that requires staying with a commodity for weeks or months at a time? You have to have a large enough account to withstand many whipsaws you can (and will) encounter on your way to riches (or rugs) (or anything in between, hehe) with this trading style.

Or will you choose to be a short-term overnight trader, who takes profits (and the other ones, how are they called… I hate that word…) more frequently?

Or you are having instant quotes, a fast killer instinct and time to sit most of the time within trading hrs in front of the screens, regardless whether hungry, thirsty, ill, or having to run to the restroom? Well, you can call yourself a daytrader then.

The moral of all this rambe is as follows: Be counscious of what you wanna do, what you wish to achieve and by which means, BEFORE you attempt to do it. (…speaking of consciousness: that is that annoying time between naps, ya know?)

Tom out