Become A Better Investor Through Specialization

What can you do to immediately become a better investor/trader? There are several things you can do to immediately speed up your investment learning curve. One of those is specialization. Investment/Trading specialization is one of the most important stages that aspiring investors/trader can reach in their development. In fact, the sooner you are able to reach this place, the better off you will be and the higher your returns will be.

When you step out into the investment and trading world, you are instantly pitting yourself against an extraordinary array of competitors and professionals. There are literally millions of others out there who want the same profits you want, and the laws of the marketplace simply object to everybody walking away with bags filled with riches. In fact, most will walk away with significantly less capital than they started with.

Given this intense competition, market inefficiency, and the limited space inside the investment winners' circle, do you really want to go out there and compete half-heartedly in a whole host of events, likely losing at nearly all of them? In investing it is a much better idea to become an absolute, top-of-the-line expert in one area, and then go out and win the field in that specialty.

As far as specialties go, there are very many options you have. Here are some choices you have to distinguish your investment specialization: 

Time Frame: This is one of the first and most basic distinctions that you can make as an investor/trader. While the thought of mastering every single time frame is appealing, and it may in fact be your long-term goal, you do not have to do it all at once. Choosing a time frame to specialize in allows your trading to be customized for you and your schedule. It also gives you direction as to what strategies you should be more focused on.  

Patterns/Strategy: You can further specialize yourself by limiting the number of patterns you choose to utilize. By limiting the patterns, indicators, or other factors that comprise your strategy this allows you to solidify your investment plan and follow it rigorously. If you specialize your strategy this mean you specialize the criteria or rules that tell you to get in and get out of the market. You will then become a more disciplined and focused investor, which is always a good thing. 

Markets/Sectors: There are many investors/traders out there who specialize in a particular sector, or sometimes a few select industry groups that they understand very well. Also, there are just as many who specialize in just one specific market, such as currencies, emerging markets, bonds, etc..Perhaps you have a professional background you can bring to bear regarding your sector analysis. Narrowing the field in this manner is yet another way to become an expert investor/trader. I have met a trader who trades only Pork Bellies, pays zero attention to any of the other markets (DOW, S&P, Gold, etc..) and achieves very high returns (sometimes triple digits) because of this specialization. 

Market Stages: Some of us choose to hone in on one of four market stages as our chosen trading environment. For purposes of making these distinctions, there are really three categories: Uptrend, downtrend, and consolidations. I have met several traders who actually do best in and therefore trade only in a range environment. Others love it best when the market is tanking, and invest/trade on the short side. The majority, however, will probably gravitate to uptrends for their time frame of choice. You can also develop a system to glide between the various market stages, investing in up, down, or sideways markets. 

There are certainly other specializations you can have as an investor/trader, but these above are the basics and where you should start to hone your skills. I find it is easier to start with choosing the time frame and market then move on to the other specialty areas. It is fine to mix and match between them, as long as your final criteria exhibit enough restrictions to qualify as a true specialty. If you do choose to have several specializations just make sure each specialization has a system with rules that adhere to those criteria. For example you can utilize both a short-term crude oil contrarion trading system, while also using a long-term technology shorting system; however, you would not want to mix the two systems rules together, keep them both specialized and separated from one another.