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Why Great Traders Specialize

Why Great Traders Specialize

In any field, whether it’s business, athletics or the arts, the person that masters his or her specialized craft is usually looked upon as the “best,” or at least as one of the best at what they do. In professional football, you couldn’t imagine a quarterback playing defense because he focuses 100% on using his talents as a quarterback, and the fact that he is a professional distinguishes him as being better than most. Similarly in trading, finding what you’re good at is an important aspect to being successful.

A common thread among high achievers is that they find their niche and continue to work to better themselves throughout their careers. From an early age, they gain a good grasp of what talents they possess and begin harnessing those strengths before most others are trying to figure out their lot in life. Moreover, those that don’t have exceptional talents simply work harder than their peers to attain exceptional achievements.

In the medical field, for example, it’s not the general practitioner that earns the biggest salary, but rather the oncologist or heart surgeon. In team athletics, the most valuable players are the ones that can perform very specific tasks, such as closing out the game after the starting pitcher begins to falter or simply runs out of gas. We call this person the “closer,” similar to the salesperson who has the cunning to get a customer to sign on the bottom line where others have failed. In football, as I mentioned earlier, the so-called skilled positions garner the multimillion dollar contracts.

In the world of trading financial markets this especially holds true. I see too many new traders continuously searching for the Holy Grail in different technical indicators, asset classes and strategies, which is fine when one is starting out. However, there comes a time when one must declare a major, so to speak, like in college.

One of the hallmarks of highly successful traders is that they have a specialty. These folks have a specific strategy or set of strategies that they have mastered and apply consistently, day in and day out.

There are two schools of thought on this: One is mastering a technique and scanning the entire universe of asset classes for these specific setups; the other is focusing on a specific sector, asset class or market.

In the hedge fund world, there are managers that specialize in short selling – they search for overvalued companies and then accumulate large short positions expecting the market will ultimately reflect the true value (much lower prices) of the company or stock. On the flip side, value managers wait for stocks to get knocked down enough to create a large discount to the company’s intrinsic value before they begin accumulating large positions. And then there are the technical traders that make buy and sell decisions based solely on the price action of the particular instrument they trade.

When I’m teaching, one comment I seem to always get is how simple the technique is. Some students think it’s too simplistic and don’t believe that it can be that easy. Let me make it very clear that though strategies may be simple, executing them can be quite challenging for some. This “it’s too simple” perception can be a problem because these students will find it hard to find a niche. They will always be under the illusion that trading has to be complicated. I believe this to be one of the major impediments in a trader’s commitment to sticking to a simple strategy and mastering it. Another barrier is changing their old belief systems, and that’s a whole different challenge.

Case in point: I had a conversation with a student late in December that up to that point had been doing well with his trading but he was hitting a little bit of a road block. He was a bit perplexed by recent market action and was torn between what the Federal reserve was doing (starting to raise rates) and the technical landscape. He’s been hearing the “don’t fight the Fed” drum beat and was taking it quite literally. Consequently, he had become reluctant in buying the market in spite of some short-term technical patterns suggesting the contrary. Remember, the market was rallying going into the New Year. I proposed that he stick to his strategies and continue to focus on honing his skills as an E-mini futures trader. Furthermore, I admonished him to let go of the distractions such as the media, or whatever else was pulling him away from maintaining an objective point of view and executing his strategy. From our last correspondence, he seems to be doing much better.

I encourage everyone to find a specialty in the markets, whether it be a certain type of market or trading style suited for daily, weekly or monthly income. Once that’s established, create a simple set of trading rules to achieve those goals that make you feel successful. We know those are different for everybody. Lastly, when I was very young my grandfather gave me some great advice. He said to me, “Gabriel, find something that you’re good at, work hard to do it better than most, and you will never go hungry.”

Joyful Trading


Written by Gabe Velazquez, Online Trading Academy Instructor. Gabe got his start in the markets as a broker trainee for Paine Webber, a mere 3 months before the market crash of 1987. He witnessed the gut wrenching fear of investors during that time period and the wild speculative euphoria of the late 90’s. That experience brought to light the importance risk management plays in trading and investing. In fact, it’s greatly influenced the way he trades today. He spent 15 years as a stock and commodities broker, conducting technical analysis seminars through-out Southern California. After many years of managing other people’s money, Gabe now concentrates full time on trading his own portfolio and teaching. Students will benefit from his first hand experience of daily involvement in the market. He brings with him an acute awareness and understanding of how the markets really work. Articulating this knowledge clearly, succinctly, and with enthusiasm is something students can appreciate. This gift for communicating was honed through many years of public speaking. He currently holds a series 7, 63, 9 and 10 (securities and options principals license.)


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