Some traders have a rather degraded idea of what a trading strategy is. A trading strategy is not something you download on a trade forum or on Twitter. A strategy is tested rules and principles which must be meaningful for you and which need to match with your personality. Sometimes select a trading strategy that you read somewhere – that is the main reason why 99% of traders fail.
In the following article we show how a personality affects the choice of the parameters in a trading strategy. If you’ve ever wondered why a trader can earn a lot with a trading strategy, while another continues to lose consistently with the same strategy, this article is for you. Determine your personality The first step is to determine your own personality type. There are three main types:
1. An aggressive trader
An aggressive businessman, alpha male who always has the last word in handelsdiskussioner and on social media. He is easy to spot as he loves to talk about their large positions, his big winnings, but also likes to impress on the big losses he took as a real man. On social media he continuously pictures of beachfront villas, fast sports cars and expensive nights out in the most exclusive restaurants and cool nightclubs.
2. A greedy trader
A greedy trader love to talk about risk and cash management. He is a lover of statistics. A greedy trader talking about trading where he locked the win with a stoppförlust above the break, or where he took some of the profits. You will rarely hear a ”Scrooge-talk” about the big winners, or all the money he had made. Control, risk, slow but stable profits and your finger on the mouse are the attributes which we select in a greedy trader.
3. An anxious trader
An anxious trader often talk about settings and potential business deals as he looks at his charts. He shares constantly displays of shops that are ”almost ready to take”. It is very easy to discover an anxious trader, because he typically will not check in the sectors he talked about, or so he goes into the trade late because he was not entirely sure. Another characteristic is the constant questions and that he often stretches out for the opinions of others.
We will also see the hybridtyper, for example, the aggressive ”Scroogen”, the greedy ”aperture” among others. Ask yourself the 4 following questions.
1.You are missing usually the entries, although you can see them evolve right in front of you. Signs that you are an anxious trader
2.You enter early. You are definitely a greedy and / or aggressive trader.
3.You regularly carry out your vinstorder too late and see prisomkastning, giving back gains. A greedy trader.
4. You close your positions too early (before you take your profit). This is a sure sign that you are a greedy trader.
Change your strategiparametrar according to your personality type
After having lost money with a trading strategy do you give up because we believe that the strategy does not work, and/or we change the settings to find explanations for the loss of the trade. The appointed merchant with a professional line of thinking accepts the fact that a trading strategy can not be a moneymaker right from the start. In addition, the parameters in a trading strategy change in a way that matches the line of thinking and personality type.
Handelsfrekvens and timeframes.
Your trade depends on what time frame you follow. 4 hour or daily time frame can give a signal every other week, while the 1 hour or 30 minute time frame generates a new input signal once per day or even several times.
A very greedy or aggressive traders may have a problem if he plays every week or every other week. On the basis of their personality, a worried traders often miss setups and trade with high time frames would mean that he will have long vacant periods. On the other hand, outer locking lower timeframes result in over-trading for the aggressive or greedy trader. For the troubled, the trader can lower time frames be a good fit because he often see the new potential settings, and lacks a single trade and the impact on the higher time frames. As you can see, the question is if handelsfrekvens and the choice of time frame is not easy to answer.
Gigantic and aggressive traders tend to widen the busy vinstorder because they believe that a trade has great potential. The troubled merchant saves constantly a reversal and will close the business before the profit target, reduce profits and thus reduce the expectation of their trading strategy. The longer the holding period is, the better. It is therefore important to be aware of how you handle business and find the optimal time for your personality.
Winrering vs riskbelöning
Some traders lack the statistical understanding of how the expectation and the probability works in the trade. For many traders, it is therefore difficult to trade with a trading strategy that has a relatively low winrering, for others it is psychologically difficult to have a trading strategy with high winrering and low riskbelöning. A profitable trading strategy with a high winrate can, and usually have a lower riskbelöning, while a profitable trading strategy with low winrering have a higher riskbelöning. For a trader it means that he needs to find the optimal combination of riskbelöning and winrate for his personality. Can you accept that you just need to a profitable trade? You can accept a low relation between the vinststorleken and losing trades that usually comes with a trading strategy that has a higher winrate? There are just some questions you need to answer.
Your risk level per trade
First of all, will your personality determine how you can handle a certain amount of risk per trade. The troubled traders tend to choose an amount at risk that is too small, while the greedy and aggressive trader take too much risk per individual trade. But it doesn’t stop here. Winrate and riskbelöningskombinationen you choose must match your risk per handelsnivå and your personality also. As we previously have described a trading strategy with a high winrate to have a lower riskbelöning. Therefore, a low level of risk per trade that it can take quite a long time to grow. The choice of a lower level of risk is a better approach for a trading strategy with a low winrering and high riskbelöning. A low winrate means that your losing positions are longer and therefore your drawdowns to be larger.
If you combine this with a higher level of risk, your mission to eat up a significant portion of your trading account, which leads to further psychological problems. When it comes to finding your optimal level of risk, ask yourself: how can I handle large drawdowns? I can accept a slower, but stable kontotillväxt? If your personality becomes uncomfortable after a few losing trades in a row, will a trading strategy with a low winrering and high risk per trade not be the best fit for you.