If you have always wondered why one trader can make a bunch of money with a deal strategy, while another one observe losing systematically with the same scheme, this article is for you .
Determine Your Trader Personality
The beginning footstep to finding the adjust trade scheme is determining your own personality type. You can break down the trader personalities into three main types :
1. The Aggressive Bully
A chest-pounding alpha-male that always has the last word in trading discussions and on social media. He is easy to spot because he loves to talk about his big positions, his big winners, but also likes to impress with huge losses he took like a real man. On social media he continuously shares pictures of beachfront villas, fast sports cars and expensive nights out in the most exclusive restaurants and hip nightclubs. He is the get rich or die trying kind of trader.
A chest-pounding alpha-male that always has the last word in trade discussions and on social media. He is easy to spot because he loves to talk about his big positions, his big winners, but besides likes to impress with huge losses he took like a very valet. On social media he continuously shares pictures of beachfront villas, fast sports cars and expensive nights out in the most single restaurants and hip nightclubs. He is the have rich or die trying kind of trader .
2. The Greedy Scrooge
The Scrooge loves to talk about risk and money management. He is a lover of statistics and playing it safe. When talking to a greedy trader, he will often talk about trades where he locked in profits already with a stop loss above break even or where he took partial profits. You will only very rarely hear a Scrooge talk about big winners or all the money he had made. Control, risk, slow but steady gains and always the finger on the mouse are the traits that mark a greedy trader.
The Scrooge loves to talk about risk and money management. He is a lover of statistics and playing it condom. When talking to a avaricious trader, he will frequently talk about trades where he locked in profits already with a discontinue loss above break even or where he took partial profits. You will lone identical rarely hear a Scrooge talk about adult winners or all the money he had made. Control, hazard, slow but steady gains and always the finger on the sneak are the traits that mark a avaricious trader .
3. The Anxious Wimp
The anxious trader frequently talks about setups and potential trades he sees on his charts. He constantly shares screenshots of trades that are ‘almost ready to take’, but where he is waiting for a little more confirmation. It is very easy to spot an anxious trader because usually he will not enter the trades that he talked about because they ‘didn’t feel right’, or he will enter a trade late because he ‘was not sure’. Another trait of the over-anxious trader is the constant questioning and reaching out for other people’s opinions.
The anxious trader frequently talks about setups and potential trades he sees on his charts. He constantly shares screenshots of trades that are ‘ about ready to take ’, but where he is waiting for a fiddling more confirmation. It is very easy to spot an anxious trader because normally he will not enter the trades that he talked about because they ‘ didn ’ deoxythymidine monophosphate spirit right ’, or he will enter a trade late because he ‘ was not certain ’. Another trait of the over-anxious trader is the constant question and reaching out for early people ’ second opinions .
Of run, in trade it is rarely good black-and-white remember and, therefore, you will besides be able to see loanblend types, such as the aggressive niggard or the avid weakly interacting massive particle among others. together with the previous descriptions, ask yourself the following 4 questions to get an depression of your trader type. If you are not sure where you fit in, after reading the broad article you will precisely know how you should set up your trade strategy based on your personality character .
1.You frequently miss entries even though you see them evolving justly in battlefront of you.
– Signs that you are an anxious trader.
2.You accede excessively early without waiting for ratification of your trade rules.
– You are definitely a greedy and/or aggressive trader.
3. You regularly execute your assume profit order excessively belated and see monetary value turn back, giving back profits.
– Your greed impulses cannot get enough.
4. You close trades excessively early before your learn profit to secure profits.
– This is a sure sign that you are a wimpy Scrooge.
Fine-Tune Your Strategy Parameters Based On Your Personality Type
The majority of traders does not come this far. After losing money with a trade scheme, they give up because they believe that the strategy does not work, or randomly change indicator settings to find explanations for a lose trade. The compulsive trader with a professional mentality accepts the fact that a trade strategy can not be a moneymaker right from the start and that there are a variety of complex factors to understand. Furthermore, the parameters of a trade strategy have to be altered in a direction that matches a trader ’ s own mentality and personality type. In the pursuit we highlight four authoritative trade strategy parameters and how your personality type interacts with them .
Trade-Frequency and the choice of timeframes
How frequently you find a deal depends on the timeframe you follow. Whereas following the 4 hour or daily timeframe may provide one signal ever one or two weeks, the 1 hour or 30 infinitesimal timeframes could generate a new submission signal every few hours or once per day .
A very avid or aggressive trader might have problems if he can only find one barter every week or two and be tempted to violate deal rules to generate more trades. due to his personality, an anxious trader will miss setups frequently and deal high gear timeframes would mean that he will have long periods of not trading and a lot of fourth dimension for beating himself up because he has missed another trade .
On the other hand, trading lower timeframes can easily result in over-trading for the aggressive or avaricious trader. For the anxious trader, lower timeframes might be a adept fit because he will frequently see fresh electric potential setups and missing a unmarried trade does not have big impacts as on the higher timeframes. As you can see, merely the question of trade frequency and the choice of the timeframe is not easy to answer. The myth that trading the daily timeframe is easier for everyone should be abandoned immediately .
The holding time and the investing horizon bring problems of barter management. Greedy and aggressive traders tend to widen taken profit orders because they believe that a trade has a big potential of making money. The result is that such traders will much see price reversing and giving back profits, although their trades have been already beyond their initial take profit order. The anxious trader constantly fears a reversion and will close trades ahead of the take profit target, cut winners and therefore lower the anticipation of his deal scheme .
In cosmopolitan, the longer the holding prison term, the more casual for a trader to ‘ mess around ’ with a trade. It is consequently important to be mindful of how you manage trades and find the optimum control time for your trader personality .
Winrate vs risk:reward
Some traders lack the statistical sympathy of how anticipation and probabilities work in trade. For many traders it is consequently hard to trade with a deal scheme that has a relatively broken winrate, whereas for some traders it is psychologically unmanageable to have a deal scheme with a high winrate and a moo risk : reward ratio .
To be clear, a abject winrate does not indicate a lose deal scheme, just as a high winrate does not automatically mean that a trade method acting will make you money. A profitable trading scheme with a high winrate can, and normally will, have a lower risk : reward ratio, whereas a profitable trade strategy with a low winrate will normally have a higher risk : honor ratio .
For a trader this means that he has to find the optimum combination of risk : wages ratio and winrate for his personality. Can you deal with long losing mottle and accept that you entirely need one profitable trade to make up for respective losers without losing your head ? Can you accept a low ratio between the size of winning and losing trades which normally comes with a trade strategy that has a higher winrate ? Those are precisely a few questions you have to answer for yourself .
Your risk level per trade
You often read the charming number of risking 1 % or 2 % on any individual trade as the easy-fix for all your money management problems. But there is more to this than precisely choosing an arbitrary count you apply to every single trade .
First of wholly, your personality type will determine how you can handle a certain amount of gamble per trade. The anxious trader will normally choose a risk sum that is besides small, whereas the avid and aggressive trader take army for the liberation of rwanda besides big gamble per unmarried barter. The psychological problems that trades that are excessively little or excessively bad bring are summarized here .
But it does not end hera. The winrate and risk : wages combination you choose have to match your risk per deal level AND your personality type arsenic well. As we have described earlier, a trading scheme with a high winrate will normally have a lower gamble : reward proportion. consequently, a broken risk level per trade wind means that it could take a fairly long time to grow a trading report because winning and losing trades have a exchangeable size. This will often result in breaking rules to find more trades which is specially genuine for the avaricious and aggressive trader. In contrast, choosing a lower grade of risk is normally the better approach for a trade strategy with a depleted winrate and eminent gamble : reward. A low winrate means that your lose streaks are longer and, therefore, your drawdowns will be bigger. If you combine this with a higher level of risk, your drawdowns can eat up a significant sum of your trade account which will lead to far psychological problems .
When it comes to finding your optimum level of risk, ask yourself how you can handle big drawdowns and if you can accept a slower, but steady score growth. If your trader personality gets uncomfortable after a few losing trades in a course, a deal strategy with a low winrate and a high risk per barter is not going to be the best meet for you .
Conclusion: Finding Your Perfect Trading Strategy Is A Never Ending Process
Finding a trading strategy is more than just following traders in forums or social media who claim to make a kill. A trade scheme that works has to be bespoke to your own trader personality and character traits. Losing money in trade is consequently not entirely the fault of the trade scheme itself, but a mismatch between the trader and the trade method acting. To find the optimum suit for yourself, follow these points :
- Determine your trader personality
- Consciously define trade parameters that could match your personality
- Evaluate the performance of each individual parameter and how you deal with them
- Make adjustments if you experience problems
- Repeat step 3 and 4 until you find your perfect fit
What do you want to do next?