All Successful Traders I Know Are Able To Do This

  • October 11, 2004
  • Rob Hanna

Since
my last column, the market has broken out of it’s downtrending
channel and now pulled back. So far this pullback does not concern me.  Nasdaq
and S&P 500 both declined during the pullback. Additionally, the VIX spiked very
quickly as the market began to pull back. That is nearly always a good sign
during a pullback. The long side looks like the place to be. Any follow-through
on the channel breakout from last week could provide further confirmation that
the trend is now up.

 

I always love watching the
baseball playoffs this time of year. The other night the announcers were
remaking how remarkable it is that Mariano Rivera has become such a great
pitcher without a large repertoire of pitches.  His cut fastball is the most
difficult to hit in the league. The other pitch he throws is a fastball, but the
cut fastball is his main pitch. Nearly all successful major league pitchers must
be able to throw several different pitches in different situations. 

 

Just like major league
pitchers, all successful traders I know are able to trade more than one
strategy. While traders may have one “bread-and-butter” strategy like Rivera’s
cut fastball, I have yet to see a single strategy that is able to consistently
extract profits from the market under all conditions.That is why it is important
to develop a repertoire of strategies that can allow you to profit in different
market conditions. Some may play pullbacks. Some may play breakouts. Some may
play trends.  Some may play reversals. 

 

Becoming expert at one way to
trade is an achievement, but you should not stop there. Continue to educate
yourself. Learn new techniques. Study the market. Soon you will be able to
prosper during markets that would have had you sitting on the sidelines or wiped
out in the past. For years many hedge funds have combined uncorrelated
strategies to try and achieve the objective of consistent returns. Manage your
trading like a business as hedge funds do and you’re chances of consistent
success should increase dramatically.

 

Best of luck with your trading,

 

Rob