How many financial instruments do you actively trade?

Trading Discussion
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The following post was written by Swing Trader. You can find his profile here: Redirecting...

After reading this post, I’ve been contemplating about what I’ve been planning on doing which is to reduce the number of instruments I trade to a maximum of 10 from my current 15. I’m curious to know your thoughts: Do you prefer to focus on one asset or trade multiple instruments? And what is your reasoning behind your preference?

Why Many Retail Investors Fail and Give Up

Investing as a whole is one of the professions that are mentally and emotionally taxing, it requires ones mind to constantly run on overdrive to process and dissect the constantly flowing information. The mental and emotional tax is even higher for retail investors and traders. The reality is the average human being is not wired to constantly process so much information, without overlooking something. This is why traders at an institutional level specialize.

At an institutional level, traders special in a selected asset class within a certain economic category or geographic region, or a specific type of analysis. For instance, you’d a trader that specialises in Emerging Market currencies, or a trader that focuses solely on ESG stocks. Each specialising individual is responsible for sharing insights with every other trading desk that may be of importance to the relevant desks, either for risk purposes or profit purposes.

But as a retail trader or investor you are required to do everything yourself, because everything is connected and you cannot afford blind spots, and in that you have to constantly filter out risk and opportunity from all the information at your disposal. For this reason, many quit or just don’t make it. Being an economist, a stock analyst across all sectors, currency analyst of both developed and emerging markets, commodity market analysis, debt market analysis, and real estate market analysis is a mentally, physically, and emotionally taxing challenge.

Trading as opposed to investing kills the parts of you that have nothing to do with the market and many people can’t handle that. Trading takes over your life, and for this reason many traders become addicted to pleasure as a means of escape from the market. Whether it’s drinking, narcotics, travelling, sex, gym, being around large crowds etc. that’s the only time you get to forget about the market and feel human again, without thinking what will happen next.

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I have recently cut my targets from about 36 markets to 6. Early days, but there is potential.

When you boil things down, there are two strategies - buy because price has been rising or buy because price has been falling. Some traders only ever do one or the other. But how beneficial is it really to be long on 14 pairs because these are the 14 which have been rising? It might be better to be long on the best one of the 14, rather than being long this one plus another 13 which are less than ideal selections.

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This really depends on the trader and their strategy.

There is a similarity to the way all pairs move. When there’s a surge in price then typically the entire market surges. It is counterproductive to open multiple trades all at the same time. It’s okay IMO to watch as many as you want, but be selective in which ones you open because the outcome will likely be the same.

I sort all my pairs by their currencies and am careful not to open more than one trade in each category. And I try to never open more than 1 trade at a time, no matter how tempting, just in case my signal is wrong.

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