I was having a conversation with a colleague interested in trading today and he posed me a question which I’m asked fairly often. In answer to the question “what should I trade?” I often find myself responding that it just does not matter. Since the advent of electronic trading the opportunities in the markets are tremendous. One can trade stocks, bonds, mutual funds, ETFs, stock futures, commodities futures, index futures, options on stock, commodities futures, or ETFs, currencies, options on currencies, or any other of a thousand tradeable derivatives. But the truth of the matter is that it doesn’t matter what you trade. What matters is that you manage your trade correctly, that you limit your risk, that you know when you will exit (which is so much more important than knowing when you’ll enter), that you don’t overtrade, and that you understand what the thing is that you are trading (meaning don’t trade currency swaps if you don’t understand what makes them move). Markets are markets and the people who are trading these markets (whatever markets they are) have the same hopes and fears that are reflected in every chart of every market throughout the history of recorded trading. A price chart for historic milk prices will look a lot like pork bellies, which will look a lot like IBM, which will look a lot like the EUR/USD. If you understand what motivates people, if you understand the psychology of trading, you can trade any market successfully.
It does not matter what you trade. What matters is that you trade intelligently.
Good Trading!
It does not matter what you trade. What matters is that you trade intelligently.
Good Trading!
