Core Market: Don’t Marry One

Don Dawson

Often times I will be talking with a trader and hear a familiar story among new traders.  “I’m making money one day then lose for 2 or 3 days.”  I usually reply, “I bet you have married a market (only trade one market).”  Usually I get a very surprised look and they reply, “Yes, but how did you know?”

ddawson-20160202-core-marketAs a professional trader you should be looking for one trading strategy that you will learn everything there is to know about it, a core strategy.  Then execute it every trade that comes along.  Too many strategies or ideas will only cloud your mind and cause hesitation when it comes time to execute your order, making you late for entry and usually getting stopped out for a loss.

This is where there can be a problem for a trader who only trades one market.  Having a core strategy means you will have to wait for the exact setup to occur in your one market before you trade.  Most novice traders do not realize they will need patience to wait for this next setup.  Instead, they feel like this one core strategy will give them a trading setup every day in this one market.  And it is possible that you can get a setup every day, but is the market going to come to that level to get your order filled every day?  Probably not, no wait – I seriously doubt it!

During the trading session the novice trader will become board or anxious that they are missing opportunities and begin to surf the charts looking for something that resembles a reason to place a trade.  The odds are this reason will have nothing to do with their trading plan.  And you know what the results are of this trading style… a winner and 2 or 3 losing trades in a row.

But, if the novice trader would pick out a few core markets to trade, they will soon find that their core strategy will have them placing trades in markets that are possibly ready to move in their favor.  Think of it like fishing with multiple fishing rods.  You have a better chance of catching dinner if you have several lines in different places of the river.

Free Trading WorkshopYour core markets could be constructed of say 4 to 6 Futures markets, allowing you to fully understand all of the contract specifications and trading quirks of each of these markets.  Now you can have your analysis done and patiently wait for price to come back to your level using your trading plan of a core strategy to execute the trade.  You will find that this will increase your odds of having the market in one of the levels you wish to trade on a much more frequent basis.

Markets move in two types of directions, Impulse Waves and Corrections.  The initial “impulse” wave is the path the market has the least resistance to travel.  This is the direction we want to trade in.  But to enter the market using our core strategy the price needs to “correct” the recent impulse move.

During the impulse wave the single market trader can make their money.  But when it takes multiple time periods (days, hours, minutes, etc.) the individual market trader loses patience waiting for the proper setup before entering the market.  Having core markets to trade will increase the frequency of core strategy setups.  Each day different markets are either in an impulse wave or a correction of some sort.

Start small with a number of core markets, but have more than just one market to trade.  I think you will find this way of trading will help you follow your trading plan rules much easier.

“The pain you feel today is the strength you feel tomorrow.  For every challenge encountered there is opportunity for growth.”

Don Dawson

This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.