What's Your Trading Personality?
As a trading and investing coach, I come across individual's with varying "trading personalities". It is amazing though to find so many people that approach the financial markets with unrealistic goals.
Take this for example: A full time business person who is self employed and manages others. They hear about the financial markets, whether it is equities, options, forex or futures and they think that this is their lottery ticket.
Now for the amazing part. This business owner, who is responsible for the growth and success of the business forgets all that he knows and states: "I think the financial markets can return 25% per month". Now I get to ask: "How hard would you have to work to bump up your business profits by 25% per month". They pause and they know they are caught right there. Most responses sound like: "It is impossible" or "Even if I worked 24 hours a day, I couldn't grow my business that much".
Sometimes, to hit the point home, I explain to this person that I now want to come into their business. I have no experience, I have other things going in my life and I want to start working for you and I want to make as much as you do, yet you have been in the business for 15 years. Would they trust me with their top clients? With their biggest proposal? No way. They would say: "it takes time!" Slow down buddy.
And then, the WOW factor. They reluctantly get that this is what they were asking out of the markets. Brand new, no experience and can't focus on it like they do their regular profession, yet they want to hit grand slams every single time.
It just doesn't happen this way.
So why do I come across successful business people who work hard? People who put in the time and grow a small business into a successful venture, yet they want to make mountains out of molehills. Why do people forget basic business acumen when it comes to the financial markets and their goal setting process? Who is at fault? I suspect it is partly those individuals who want the "lottery ticket" and partly the recent focus on the financial markets and partly the numerous companies who tout these returns. Bottom line, do your due diligence as it was your business! After all, trading is a business!
The economy is in the news every day. The reality is people are suffering - homes are underwater, credit worthiness is going downhill and people are frustrated. Well, let me tell you this, it will get worse! I am not pessimistic, just a realist. And just because things get worse, does that give a new entrant to the financial markets the right to expect a windfall? Absolutely not.
Until people realize that the markets are just another business, we will see mass failures of the public as they try to "make the markets work for them". First off, as any great trader knows, we adapt to the markets, not the other way around. Secondly, until an individual realizes that they have to approach the markets with an understanding of their individual "trading personality", their success will be limited. Luck only last for so long.
So, what makes up this trading personality? The following criteria are what any serious trader or investor should clearly define:
**account size (and the risk associated with entering the markets)
**risk tolerance (also know as account risk). How much of your account are you willing to LOSE on any one trade
**time available to trade (day traders should be in front of the markets 5-6 hours per day, consistently)
**type of trader: day, swing, intermediate, position. Given your time available to trade, what is realistic for you? I am amazed at the people who say, I work from 9-5 and then I want to be a day trader at night. I am not even sure what that means!
**trade risk (this is a direct result of your trading type). This is the percentage you are willing to lose of any purchase price. Day traders will put on more contracts and risk a small amount to make a small amount compared to a swing or intermediate trader who risk more of the purchase price to make more over a longer period.
This list is not exhaustive, but is a great start to realistically identifying your "trading personality" and then approaching the markets with trading plans that reflect YOUR situation!
Happy Trading and Be Environmentally Cool,
Forex trading is one of the riskiest forms of investment available in the financial markets and suitable for sophisticated individuals and institutions. The possibility exists that you could sustain a substantial loss of funds and therefore you should not invest money that you cannot afford to lose.
Market Analysis Archive
- 1 of 23