What Type of a Trader are you?
When you start trading currency online, you'll probably spend a lot of time going over technical analysis, charts, SARs, RSI, Stochastics, financial and economic news, browsing forums, trying out brokers and basically understanding everything you can about the Forex Market.
However, there is something else, something a lot more basic and a lot more important for a budding trader. It is in fact, one of the first things a trader should think about and understand, before he starts trading, and is the most important factor that could make or break his trading fortunes.
Most traders spend a lot of time perfecting their trading systems, but forget about what works behind their trading system – their trading personality. Understanding what kind of a person you are, and what kind of a trader you want to be is a pre-requisite to trading Forex successfully.
However, most people want to go the other way – first learn to trade successfully, then try being a particular kind of trader and if they have time, focus on other aspects of their life.
Successful Forex traders don't become successful because they adopted a trading strategy, rather they adapted forex trading to suit their strategy for making money. To make money with forex trading, it has to become a part of your bigger goal towards financial independence and success, and to do this, you'll need a lot more effort than simply poring over maps and charts. For starters, ask yourself:
- Are you a risk taker or risk averse?
- Are you able to make plans and stick with them?
- Do you usually keep track of your income and expenses?
- Are you meticulous or impulsive?
- How good are you at multi-tasking and time management?
Accordingly, you may decide you want to be a long term trader (position trader) and hold your positions for weeks or months at a time, or a day trader who closes his position when the session closes. You will also decide whether you want to lean towards fundamental or technical analysis to understand currency movements. You will also be able to judge whether you can afford high-risk methods like scalping, or you'd prefer taking it slow and easy.
Depending on the kind of time you have, you attitude towards stress and losing, and your current financial liabilities, you should first determine how you want trade, before beginning to actually trade.