Good Traders, Bad Traders (Part I)
What is your profile as a forex trader? Have you ever thought of thinking which trading profile best suits you? A trading profile that matches your personality can make the difference between success and failure. Forex traders have different profiles. Your trading profile depends on the time frame you trade. Are you a short term trader like a day trader or a swing trader? Are you a long term trader like a position trader? So your time horizon can range from a very short term to a very long term. Find the time horizon that best suits you and bring all your trade plan considerations in line with it.
Discovering the bad traits in you early is going to help you get a firm toehold and develop into a good trader in the long haul. So determining your trader profile early on in your trading career is very important for your success as a forex trader. Good traders share common characteristics. Bad traders share many things in common.
Jumping from one trading style to another will make you move in circles. You need to find the trading profile that best matches your personality. Too many traders jump from one type of trade and profile to another quickly and often. Forex markets are enormous, complex and deep. Finding your right trading profile is essentially finding your own niche in the market. Once you know your profile, you can dig deeper for improvements.
So how you determine your trading profile? The primary considerations in determining a trading profile are: 1) How long on average do you expect to hold your positions? 2) How much profit you wish to achieve in each trade? 3) How much risk you are willing to take in each trade?
The longer you stay in the trade, the more you are at the risk of a sudden news release or announcement that can be bone jarring for your trade. At the same time, you should know this fact that the longer you hold a position, the more you can benefit from the developing trend.
So what are the most probable trader’s profiles? The answer to this question will lead you to one of the following profiles: 1) Guerilla, 2) Scalper, 3) Day Trader and 4) Position Trader. A Guerilla Forex Trader is looking for very short term profits something like 10-20 pips. Trading costs can become highly significant for a Guerilla Forex Trader as he/she may be in and out of the market frequently.
If you are new to forex trading, you cannot and should not be a Guerilla trader. Now read it very carefully, a Guerilla is not a good fit for a new trader. This profile is best left to the professional forex traders with direct access to the interbank market and very low bid/ask spreads. A Guerilla Forex Trader might follow a 5 minute chart to follow the market, the 30 minute chart to determine the long term trend in the market and 1 minute chart to time trade entries and exits. There is too much noise on the 1 minute chart and it will be very difficult to make sense of that noise.
So if you are a new trader just starting to learn the ropes, you should avoid Guerilla trading profile. You will not be able to cover your trading cost with this profile. You can only be profitable in the long run if your trading cost is less than your profits.
Mr. Ahmad Hassam is a Harvard University Graduate. Discover a revolutionary Forex Robot System. Learn Fibonacci Retracement!
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