Which do you guys think is better way to trade out of the following groups of people. Jack Of All Trades = Will trade at least 2 assets classes stocks, bonds, FX, commodoties etc an example would be Stanley Druckenmiller or Soros Specialist = Will trade on asset class only. An example would be Steven Cohen only trading equities, Richard Dennis only trading commodities Master = Trading one instrument only. John Arnold traded only natural gas, Marty Schwartz only traded SP500 futures. I started in equities and commodities, blew half my account switched to FX was very successful and I am now considering starting to trade stock index futures. Is it better to be a jack of all trades or a master of one ?
For a retail trader, it is best to be a generalist. Correct asset allocation is likely to be the primary source of profit. But, a specialist/master is more likely to find an edge.
Each of your traders had very specific reasons that they did what they did from passion to system to fund size, so you have to consider all of those factors.
For a systematic trader I don't think there is any question that trading multiple asset classes is better, as there isn't likely to be enough difference in your expected performance between assets, than you'll gain from diversification. Let me ask myself a question. Lets suppose I have a system trading one instrument, and one trading rule (or signal if you prefer). On average such a system will have a performance of 0.30 Sharpe Ratio units. Is it better to spend time adding another trading rule to that instrument, or add more instruments? If I add all my current trading rules then my average performance will go from 0.30 to 0.40. If instead I add one instrument from all the other asset classes the average performance will go from 0.30 to 0.80. Trading across asset classes improves performance much more than trading one asset better (this follows from the law of active management). The upper limit on positions for a fully automated and systematic trader will probably be capital. If you're trading manually there's obviously an upper limit on how many markets you can follow. If you're not trading systematically its more likely that you'll get a "feel" (or edge if you prefer) for only a limited number of markets. However I would urge anyone who can who trades one market, and thinks they can handle say five, to trade across asset classes and acquire that "feel" in say one instrument from each asset group.
Trading multiple assests provides more upside opportunities but also comes with more risks and so the key Is to manage the risks (including the correlation risks). Interesting everythings moved in the same direction the last couple of days.
It only comes with more risks if you leverage up because you think your risk is lower due to diversification across asset classes. Nobody is forcing you to do that. You could "bank" the lower volatility, and end up getting the same return with less risk, rather than the same risk with more return. Yes if you choose to leverage up you'll need to think about correlations, and correlation "shock" risk. There's nothing inherently risky about trading multiple assets.
i like the: "Master = Trading one instrument only. John Arnold traded only natural gas, Marty Schwartz only traded SP500 futures." i like being basic, simple. KISS: keep it simple, stupid. i equate trading like sports athletes...there has Never been an excellent athlete that played more than one sport. -- you need to master one thing only.
I think it has to do with time, I am guessing most of us had a job before we got involved in trading and perhaps many kept at their jobs much longer than needed to know it wasn't a fluke of profitable trading. So if you work days, not like you can often go to restroom to day trade unless you trying to dink out pips in evening. So I think most start with equities/options out of necessity and not much thought of doing one of the three. If one gets good, then it can blossom into Specialist and or Master, don't think one can say they going directly into one area unless you hired to do so out of college, then you have little choice. I think getting to know what is out there first to see how your personality is to what you can handle is huge. Think Risk equates to knowledge which is back tested to become knowledge. Like one trader risks 2% on signal "A", and 2nd trader found way to do "A" signal but risk half of one percent-he can now do four times as many shares. But there is so much more to consider as well.