What Instruments (Scripts) to Trade
Table of Contents
What Instruments (Scripts) to Trade?
Did you know that many professional and institutional traders only focus on one or two scripts or only a few another trading instruments? The reason for that is to enable them to become really proficient with the instrument they chose.
A good analogy for why this is beneficial can be found by looking at the way lawyers practice law. As a lawyer, you can specialize in many fields, but the best lawyers only focus on one particular area. They have one field on which they concentrate all their time and effort, and this is what allows them to be the best in their chosen area of expertise.
Professional traders know all the necessary aspects of the market they trade. They know the average volatility, correlation to other instruments, the average impact of different macroeconomic news, as well as average volumes. They know if the market tends to move in spike or if it moves in a more subdued and calm manner. They also develop some sense of feeling for their core market. It’s something that is hard to put into words, but it is there.
Steps to Choose Right Trading Instruments
- First decide how much time do you want to dedicate to trading i.e. Full Time or Part Time. If Part time then select the available segments active in your Part Time.
Full Time will have lots of options to choose than Part Time - Next is whatever segments are chosen select few scripts and test the following:
- Liquidity: Open DOM and check whether the bid-ask is tight (narrow also works).
- Volume: Open 1 min chart and check whether there is enough volume under each candle and is normal volatile.
- Start “The Development Stages” and in stage 1 Filter out instruments which have least trading opportunities in your Style i.e. Intraday, Swing or Long Term Investment.
- Finalize max 2 instruments and continue with the “The Development Stages”.
That’s all there is for Selecting Scripts. If performance of the 2 instruments is good you can increase instruments if you highly regard that.