Choose Your Trading Style in the Markets

Posted in Trading Commentary, Submitted by Trading Critic on Tue, 2006-05-16 02:58.

People give names to the various types of traders out there. Perhaps they all have origins from the trading desks they had when they were gainfully employed for a major financial institution. "You will be a day trader." says their boss. "Ok". "I dub you a value investor". "Ok." There are a lot of labels out there about the types of trading there is: intra-day, inter-day, end of day, swing trading, trend trading, position trading, value investor, heck there may be a lot more trader labels out there. But the truth is that the labels are no better than stereotypes.

Yes, labelling people's trading styles is just like ostracising a racial group or any group to a certain stereotype. Ok, people may say they focus on one type of trading style, but their overall trading style would encompass a trading plan that maybe a hybrid of the various trading cycles. The truth is that, there is on right way to trade. Everyone has a style.

By the way, I don't condone black box trading systems. Black box trading systems, are pieces of software that tells you basically when to buy or sell. You do not know the basis of that buy or sell trigger, the system just tells you to do it. It may have advantages, but I think the disadvantages far outweigh the advantages of such types of trading systems. First of all - you have no understanding of the system. So if something goes wrong, you can't learn from your mistake. Well you can actually learn from your mistake - and that black box systems for trading is certainly not the path you should take in your path to financial success by trading the markets for a living.

So, choose a trading style that fits your personality. If the system fits your personality like a glove, there is a better chance your system will work - given that you follow a strict trading plan. If you enjoy high risk, high return strategies because you like the adrenaline rush (well in truth - you shouldn't have an adrenalin rush when trading) and you can only handle short bursts of stress, well you should look at generating a system that will work with you in that effect. A system that generates profits in the short term, with short duration trades and quick profits. If you have the personality type where you can handle stress and enjoy the concept of holding longer would generate larger profits (without going into the zone of investments) well, form your trading plan around that fact.

In conclusion, choose a trading style that fits your personality. Sometimes, this won't be apparent to you at first - it may take a little time, a few trades, a few wins and losses to find out what type of trading personality you are. Remember to always trade with a plan - an entry plan, an exit plan and have a risk management plan in place with every trade.

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