Another prop trader joins the ranks by showing us the power of patience. However, he did what a professional prop trader in an institution would do: he found his niche and specialized it. That ultimately led to his success.
You see this with many institutional prop traders, and many of our team too. We don’t cover all the pairs, we all have our own coverage that we specialize on. Indeed we take a generalist approach, but there will be currencies that professional prop traders will specialize in.
That is where they make their real money. When they say the market comes to them, that is what they mean, they know the market well, it becomes easy to understand its DNA and what drives them.
Normally you will hear some traders in various contexts say they only trade GBPUSD, or only majors, or only APAC, EM etc. On the equities side, you may hear some traders state they only trade certain sectors which some even saying they only trade certain companies.
You'll hear similar with commodities, some saying they only trade gains, energies, metals; even in fixed incomes where some will only trade corporate bonds or treasuries and so on. And in each instance, you are going to find traders that specialise in subsets.
What is the purpose of traders having specific coverages?
I will quote myself from earlier:
“[This is] where they make their real money. When they say the market comes to them, that is what they mean, they know the market well, it becomes easy to understand its DNA and what drives them.”
Read this and pause.
Did you pause and absorb the information? Good, now I will explain.
These traders specialise in a small number of markets. That is, they strive to know everything there about them. Let's go through GBPUSD, if I were to say I'm a GBPUSD trader. I would endeavour to know everything about this pair.
Effectively it what that means is being in tune with all the key technical drivers, the key fundamental drivers, the key sentiment, all the relevant comments. Anything GBPUSD would be my speciality, the aim would be the GBPUSD specialist.
Think of it like talking to a stock market specialist who knows everything about Facebook, or Apple. If you were going to buy or sell, you would want to make sure the person trading or guiding you knew virtually everything there was to know about the company. Including the internal and external drivers of the company.
That is the level of expertise that a specialist forex prop trader does with a particular currency. Though it does not necessarily mean they limit themselves to a single currency, they could have a small number of currencies and specialise in those.
Remember, forex is pairs rely on the USD and if you are clever you can find opportunities with cross pairs; one of the core lessons you can learn with our Mastermind.
While there are advantages to diversification, we also advise you to know your market well as that is one of the key foundations of proper risk management which means the same market could arguably keep yielding profit!
Without further ado, here is DeShawn's interview!