Find Your Trading Style
The first step a new trader should take to learn their trading style is to find out who they are. Most new traders fail to realize that psychology plays such a vital role in success as a trader. Consequently, they fail over and over in a trading style or methodology that doesn’t fit them. They will waste years in this endeavor before they either realize the error of their ways or give up.
If you have ever tried trading a style that doesn’t fit you, you know how hard it can be. I know a guy who was trying to trade a swing trading strategy. He slept with the computer beside his bed and woke up during the night to check on his positions. He would put on a trade and then close it as soon as soon as it showed a profit. Sometimes exiting 20 minutes after he entered the trade even though it had not gotten anywhere close to his planned target area. He didn’t have the patience to swing trade. Five years later he began finding success in scalping and trading intraday.
Another a trader was learning to be a scalper. He put on a trade and instead of scalping off the profits within seconds or minutes, would decide he liked the trade and hold on to it sometimes for weeks. He obviously would be a better swing trader, Trend Follower or maybe an investor. Four years later he is still an unsuccessful intraday trader.
Another extremely successful swing trader says he can’t sleep if he doesn’t have any positions on overnight. Perhaps that’s why he’s so successful as a swing trader. It fits him.
Know Yourself, Find Your Trading Style
Knowing your personality and psychology is critical to choosing a trading style that you will be comfortable with and ultimately successful at. You have two choices. Choose a trading style that doesn’t fit you and try to completely rewire your psychology to fit it, or, you can change your trading style to one that fits your psychology. In my experience it’s much easier to change trading strategies than to change your psychology.
Understanding our psychology may require some digging. Your friends and family may describe you as laid back, easy going, analytical and patient. Based on this feedback you may think you are a natural Swing or position trader. However, they only see what you project on the outside not what you’re feeling on the inside. When it comes to trading, with real money on the line, you may find the opposite is true. It may be extremely difficult to hold positions. You may be quick to enter if it meets your criteria and quick to exit if things turn negative. Maybe you love trading and want to be involved. You might fail as a swing trader by jumping out of trades early and not letting trades play out and eventually find profitability as an intraday trader.
Try, Try, Try Again
Most traders have to try several different styles to ultimately find what feels right. It’s advisable to do this on demo and then with very small size after you are seeing success on demo. Try a style of trading that you think might fit you. No matter what you chose you may be a little uncomfortable at first. After all, trading is probably completely different from anything you’ve done in the past. Think of a professional athlete. Many of them played many different sports growing up but eventually gravitated toward the one they excelled at and enjoyed more. Any style you try will take a little getting used to. Even when you do find something that fits your personality you will likely still need some psychological tweaking.
Found Your Trading Style? Theres Still Work to Do
Once you figure out what trading style fits your personality, you’re off to a good start. But there’s still a lot of work to do.
You might learn that intraday trading fits you. You’re flat at the end of the day and sleep like a baby at night with nothing at risk in the markets. On weekends you can focus on other things rather than worrying about price gapping through your stop on Monday morning. However, you may find you are prone to overtrading or revenge trading. This is something you will have to work on to overcome. Another common issue is after a series of losses you have difficulty putting on the next trade, you pass on it and learn later it would have been the trade of the day and won back all of your losses.
These are common psychological issues you may have to work through even after you find a trading strategy that fits you. Save yourself a lot of time and money by finding something close and working through the individual issues as you go. Work with a trading psychologist if necessary. You will have to overcome these weaknesses before you can move to the next level.
Take the personality tests in the Trading Quizzes section of TradersInfoHub.com to get started. Work with a legitimate trading coach who can teach you a methodology that fits your personality. Find help in the Trader Psychology section if your having trouble getting over some of the psychological hurdles that face nearly every trader. Keep learning, consistently work on your discipline, seek help from experienced traders and don’t give up.