Lessons from the Pros

India Markets

Multiple Asset Classes?

I was giving a talk to a group of Online Trading Academy students in Atlanta, Georgia yesterday. These were students who had taken multiple classes at the center and were trading several asset classes in their own portfolios. The talk was centered on how the different asset classes are related to each other and how you can use them as leading indicators for each other. Throughout my trading, I have always looked at multiple assets as a way to enhance my trading success. I have noticed that traders who focus on multiple assets such as stocks, commodities, currencies, and bonds, have better trading results than those who only trade one asset alone.

This brings up a question that I hear often, “I just took the Professional Trader class but want to trade ‘X’ (insert forex, options, or futures here).  Should I take the class immediately or will I get confused?”  Due to the way that the asset classes are related and the way that Online Trading Academy’s courses are structured, it is an advantage, not a detriment to proceed through your education at an accelerated rate.  All of the courses at Online Trading Academy are centered on the same core strategy of trading with the trend and at supply or demand levels.  When you proceed from the Professional Trader course to another asset course, you will first review the core strategy and then learn how the new asset trades and how to apply the core to trading that new asset class.  Reviewing the core strategy is essential for students, even though they may have been trading for years.  Even as an instructor, I relish the opportunity to teach a course because as I am teaching the core strategy, I am also re instilling it in my own mind and making sure I am following it in my own trading.  So the review process is vital to make sure the students are trading properly in their own accounts.

One of the biggest objections I hear from students who do not wish to progress immediately into another asset class course is, “I want to go home and practice what I learned in the Professional Trader Course and make sure I understand it before I move on.”  This sounds great in theory.  The reality is that most students will go home after the class and procrastinate on reviewing their material, writing a trading plan, or even practicing their trading prior to putting capital on the line in live trades.  This is if they even bother to open a trading account at all!  Taking an additional class shortly after their first one ensures they are continuing to practice trading properly.  I have not noticed students becoming confused from taking multiple asset courses; in fact the opposite seems to happen.  They seem to clarify their questions that they may have had on how to apply techniques.  The repetitions of the strategies helps make it become part of their routine.

As I alluded to previously, knowing the relationships between related securities can help you by either confirming trades or even offering a warning sign for trend reversals.  Commodity futures will often bounce from supply or demand levels just before or as individual stocks will.  For oil companies, refiners, or even airline company stocks, this can make a huge difference in your trading.  Certain currencies also hold a strong relationship with commodities or even equity markets.  Charting them can  give you a warning before a change of trend direction.  The knowledge of how to trade multiple asset classes coupled with the skill set of being able to chart them is a huge advantage for any trader.  Get that advantage for yourself.

DISCLAIMER 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.

Join over 170,000 Lessons from the Pros readers. Get new articles delivered to your inbox weekly.