A trading generalist may employ a number of styles and wear a number of hats, without emphasizing anything in particular.
The term “generalist” is used to describe a person who is skillful or knowledgeable in a number of different areas, but not necessarily an expert in any particular one.
In the trading world, a generalist would be someone who is active in many different styles—such as day trading, swing trading, or positon trading—but with no particular preference among them. It can also refer to someone who is comfortable trading all types of setups: long, short, breakouts, pullbacks, overbought, oversold, etc.
In fact, many generalists believe that to truly be considered traders, they must be able to put on positions in all sorts of situations, even across different asset classes. They would just as soon put on a forex or futures trade as they would an equities trade.
This flexibility allows them to go where the trading is best. If the market is overextended, they can look for stocks to short off of reversal patterns. If it is flat, they can write options combos that could potentially profit from low volatility. If the tech sector is on fire, they can concentrate their efforts there and then seamlessly move to the next hot sector when sentiment changes.
The General Agnostic
Taking this approach to trading might seem overwhelming, because you would think that there is too much knowledge to be consumed. By attempting to be “trade agnostic,” you run the risk of not reaching a minimum level of competency in enough areas to be profitable.
That’s why it is common for generalists to apply the 80/20 rule when approaching the markets. They know that only 20% of trading knowledge is specific to a style, asset class, or sector, and that 80% is universal. Therefore, they focus only on the 20%.
This helps enable a generalist to understand how a big rally day in stocks affects the bond market, for example, and on that basis, possibly take a trade in bonds. The point is, you're arming yourself with enough general knowledge about how other asset classes function and interact to at least consider how another position would perform, without getting too deep into the nuts and bolts of a particular market.
In some ways being a generalist has its advantages, especially for those who don’t like to sit on their hands. Having a wide range of competency in the markets means that there will consistently be legitimate opportunities to trade, eliminating that deadly temptation so many traders fall victim to: placing trades out of boredom.
But one thing most generalists don’t have are set hours. That’s because with everything out there, from currencies to futures to overseas markets, there is always someplace for them to trade, 24 hours a day.
for thinkMoney ®
Financial Communications Society 2016
for Ticker Tape
Content Marketing Awards 2016
Market volatility, volume, and system availability may delay account access and trade executions.
Past performance of a security or strategy does not guarantee future results or success.
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.
Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.
The information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.
This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.
TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2018 TD Ameritrade.