Why Specializing in One Market is Better Than Scanning the Whole Market

As a trader, the journey to consistent profitability is often paved with insightful questions and experiences. One such question that kept me thinking was: Is it better to trade the one stock regularly rather than constantly looking for a setup somewhere in the whole market? This is a question worth exploring, given the landscapes and methodologies in trading today.

Initial Approaches and Learning Experience

When I started my trading journey, I was fortunate to learn from a group of highly profitable traders. Every one of them emphasized the importance of specializing in 1-3 markets rather than trying to find setups across a vast number of markets. At the time, I was intrigued by this advice and decided to ignore it. My reasoning was that with advanced trading software, I could automate the process of finding profitable setups across multiple markets. After all, why spend so much time manually analyzing every single market when you could let the software do the work for you?

I applied this approach for several years, often finding and trading profitable setups across various markets. However, the results were not impressive. Most of the time, I ended up being a breakeven trader, with occasional wins or losses. This experience reinforced the notion that my intellect, while undoubtedly sharp, was not the answer to my trading dilemmas.

During one of those years, an educational turning point came during a day-long seminar. One of my teachers walked us through a series of trades on a specific market. His approach was remarkable: during good periods in the market, he made substantial profits; during sideways or volatile periods, he still managed to turn a profit when he was right; and even when he was wrong, he was successful because his system was designed to profit from trends. In essence, he was making money not just when he was right but also when he was wrong.

This revelation was a breakthrough in my trading education. It dawned on me that a successful trader doesn't necessarily need to be right all the time. What's crucial is having a robust system that consistently turns a profit, and being committed to executing that system effectively. The key challenge lies in maintaining focus on a small number of markets where you can truly understand and execute your trading strategy.

Honing In on One Market

In pursuit of this epiphany, I decided to give specialization a try. I focused on trading just one market for about three months during a particularly challenging and sideways period. The results were surprising and gratifying. Within this timeframe, I made approximately $80 in profit, despite the volatile market conditions. This journey was markedly different from my previous experiences, as I was simply following a well-established trading system.

The process of trading one market was both enlightening and monotonous. It required significantly less time and effort, focusing on a small range of decisions and executing them consistently. Each day, I spent only 5-15 minutes analyzing what to do, and the rest of the time was dedicated to maintaining and documenting my trading strategies. This contrasted sharply with the previous method, where I continuously scanned dozens of markets daily, often without tangible success.

Focus and Consistency

My experience aligns with the advice of many seasoned traders. The majority of successful traders advocate for focusing on a limited number of markets where they can fully understand and execute their trading strategies. By concentrating on one or two markets, traders can better maintain their focus and performance over time. Conversely, attempting to spread attention and resources across numerous markets can dilute the effectiveness of any given strategy.

While the path to consistent profitability might seem counter-intuitive, empirical evidence supports the notion that specializing in a single market can yield better results than constantly scanning the entire market. For traders like me, who employ systematic and trend-following strategies, dedicating attention to a single market provides more consistent and reliable outcomes.

Rationalizing the Approach

Several other traders I mentor have encountered the same issue I faced. Despite their intelligence and the plethora of markets at their disposal, they struggle to achieve consistent profits. Their approach is to trade numerous markets in search of the best setup, often leading to minimal gains. In contrast, I recommend that they focus on one or two markets, as it allows for better execution and focus on a well-tested strategy. The time saved in1 scanning and analyzing multiple markets can be redirected towards documenting, refining, and executing their trading strategy in a single market.

My advice is based on the premise that traders need to be laser-focused on the markets they employ, to truly understand and leverage their trading system's potential. Consistency in trading results from having a clear strategy, maintaining focus, and adhering to that strategy with discipline.