With the bevy of information at a trader’s fingertips, many climb aboard the merry-go-round of learning never to depart. They reason that improving trading results is inextricably linked to acquiring more knowledge. If one can develop mediocre trading habits after reading one stock book, surely they’ll do better after reading five. If one attains a modicum of success by trading a simple long stock strategy, surely they’ll see improvement if they also learn the nuances of shorting, options, spreads, and futures. As they energetically jump from one topic to the next, one strategy to another, I wonder if some traders are passing up a more rewarding path. I wonder if by putting a premium on the breadth of their knowledge, they’re losing sight of the depth.
Is it better to know a little about a lot, or a lot about a little?
I’d argue the latter, particularly with trading. Better to be great at a few strategies than mediocre at numerous ones. I suppose in the long run the ideal outcome is to know a lot about a lot, but such an endeavor takes time and is achieved piecemeal.
StockTwits plays an interesting part in this process. It reveals one’s discipline or lack thereof. Trade ideas are a dime a dozen and it can be seriously tempting to simply follow trades at random. If one isn’t a careful curator or disciplined observer their portfolio can become a hodgepodge of day, swing, and position trades with stock and option positions galore.
In your knowledge acquisition quest, don’t sacrifice specialization. Don’t become a jack of all trades and master of none.
For related posts, readers can check out:
My Idea Factory
Strategy Hopping
The Twitter Trap
{ 4 comments… read them below or add one }
I believe you nailed it. I have never followed twitter spewing stock tips from strangers simply because I was far enough along with my trading when it started, where it sounded like something that would obviously take away from my usual focus. Jumping around trying to do lots of really short term stuff is usually wrong.
Appreciate the thoughts heywally.
Specializing in one trading style is surely a good thing. However, I am a strong proponent of trial and error : in order to know what really works for someone, one has to test many different things. How can you know you would be more comfortable trading commodities on the long term with a contrarian point of view rather than daytrading stocks using trend following if you haven’t tried both ?
So yeah, people shouldn’t jump around from one strategy to another just to increase their performance, but if they do it for testing purpose I’m not sure it’s so bad.
Great points Grotaiche. I suppose the key is to find balance between spending time specializing versus continually searching out new strategies; a balance between maximizing what you already know and seeking more. I certainly tried all sorts of trading styles and continue to experiment with new ideas.
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