There is a phrase in the English language that could be used in forex trading, “Jack of all trades master of none.” It refers to someone who has abilities spread across a broad range of trades and skills but isn’t an expert at one type of work. Although the phrase is considered an insult, it isn’t.
Think of a tradesperson who could turn their hand to a problem with gas, electrics, a person who could also plaster a wall and repair domestic appliances like washing machines. They’ll have a broad level of knowledge across a spectrum of trades. They’re highly competent and might be able to fix any household problem up to a point, but they might need to call in the experts at some stage.
How does this “Jack of all trades” reference relate to FX trading? Well, our temptation as traders is to bite off more than we can chew, to trade several markets or securities concurrently, to overtrade and take on too much stress. The alternative is to slow down, minimise your trading and concentrate on developing trading skills in one sector.
A real-life comparison might be appropriate. Imagine being a car dealer who doesn’t sell a wide range of cars. Instead, they only supply one marque, perhaps Porsche. But they get more granular; they only buy and sell Porsche 911s. They become the absolute experts on this prestigious model.
They know the current trade and retail prices without referencing online data. They know the pros and cons of each 911 model throughout the years. They’ve also built up an enviable support network for service, parts, repairs etc.
Sure, they might be missing out on deals with Porsche Caymans or Cayennes, or other German marques like BMW, but they’re disinterested in missed opportunities elsewhere. They’re steadfast and single-mindedly dedicated to their niche.
Let’s bring it back to online financial trading and forex trading. Like our Porsche dealer, we decide not to trade all securities we only buy and sell in one sector.
We don’t trade equities, equity indices, commodities, crypto-coins and forex currency pairs; we only transact in a single niche. It could be equity indices, precious metals, forex etc. Crucially, we stick to one. As an example, let’s focus on precious metals only.
- We decide only to trade gold and silver.
- We know which brokers offer continually tight spreads on both securities.
- We become experts at filtering out all other markets and market noise.
- We use our economic calendar to concentrate exclusively on events, data, and news that are likely to affect the value of both precious metals.
- We learn the correlations (positive and negative) between gold, silver, equity indices and currencies such as the US dollar.
- We have immediate recall of both precious metals’ recent high and low.
- We have photographic memory imprints of various time frames over recent days and weeks.
- We can recall the exact time when different technical indicators aligned on a 4hr timeframe indicating a swing and market sentiment change.
Transacting trades on one group of securities has other benefits too. You’re less likely to suffer the stresses associated with our industry. You’ll slow the overall process down and concentrate on critical issues such as understanding risk; therefore, you’ll develop tight money management and improve your discipline. If you trade in one sector, you’re less likely to overtrade.
Let’s suggest you’re a swing trader with a day job looking to supplement your income. You successfully traded XAG/USD (silver) throughout 2020. You only received one or two trading signals each week. You stuck to your trading plan, including risking only 1% account size per transaction.
You set up your MT4 platform to automate the process for you; if specific technical indicators aligned, you bought, sold, got stopped out or hit your take profit limits.
If you’d followed the scenario mentioned above, you might have enjoyed a successful trading year as silver increased in dollar terms by approximately 50% during 2020. A return on investment that many investors could only dream about—just one security, trading it on your terms, effortlessly and stress-free. Trading one security efficiently and effectively is a route many novice traders should consider. Once you master one, you can always become the Jack of all trades. Or perhaps if you become highly proficient, you can eventually become Jack of all trades, master of all.