Trading a focused sector

[banglenot]

Hi, folks.

Good board -- tolerant of those new to the profession, and good ideas with courtesy. Quite a few forums descend into shouting matches, and this one has very little of it.

I'm sure it's been discussed before, but am unclear how to search for it. If the question is redundant, please let me know where to review a thread.

I've been trading US equities actively for a year, and doing OK. (In China and Latin America, I leave it to mutual funds). Made some money in calls and puts, mostly holding for a quick 2-3 day move and exiting on the gain (or faster if my stop is hit). Lost some, too, as I learned. So it goes, but I strongly believe you only learn when you have skin in the game.

But my concern is this: it's too easy to trade by following every earnings report and news story, looking for gold in a vast store of dross.

Question: Do the more successful traders pick a trading subsegment and become expert on it?

For example (and they are just examples, not suggestions): copper or crude oil as a subset of metals commodities; semiconductors or IT services as a subset of tech equities; orange juice or corn as a subset of agricultural; specific forex currency pairs.

Since I'm fascinated by equity options, do successful option traders do the same? Say, 20 stocks that they trade again and again over the years?

Thanks for your thoughts.

 

[Benton D Struckcheon]

Well, since 2000 I've been pretty much in gold continuously, trading it actively since around 2004. My one foray outside of this sector got me creamed, so I guess this one's been it. I'm no gold bug, but I do find it a very easy market to trade.

 

[banglenot]

Mind if I ask why? I assume its liquidity is attractive, of course; but are it's market drivers well defined as well? What else makes you interested?

Is it then typical of experienced (and profitable) traders to pick a sector and stick with it?

 

[Benton D Struckcheon]

I don't know if most folks specialize. In my case, what happened was that in 2000, it was the only thing I could see that wasn't in a bubble, so I got in. The market driver for gold is simple: where the dollar goes.
It's been in a more or less continuous bull since then, so it's just been a question of riding this wave. For short-term trades, even if you're looking to make money from both sides of a market, I think trading something that's in bull mode is still easier: the moves are wider. Bear markets eventually settle, if they last for a while, into a rut, making them not terribly good for trading, the prime example here being gold in the nineties.
I'm nervous about it being near the end, so I'm now studying other stuff very closely, so as to make sure not to get creamed again when I move out into something else.