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ForexTraderX

What Type of Trader Are You?

By ForexTraderX, in General Trading

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ForexTraderX    10

ForexTraderX
Posted

There are of course as many ways of approaching trading as their are people who trade...

 

But I want to draw a distinction between three main types of traders:

 

1. Mechanical - A mechanical trader is one who's rules could very likely be coded into a computer and it would make no difference (and of course, all fully automated trading falls in this catagory).

 

For those who are 100% mechanical, or automated, I would like to know what type of information you use to determine your trades. Do you use any fundamental or sentiment data? is it pure price action/volume based or are their other price derived indicators you use as well? Do you find this is a very comfortable way for you to trade, or do you find that you second guess signals, and/or feel you are "missing out" on opportunities due to the rigidity of your rules?

 

2. Rule Based Discretionary - a rule based discretionary trader is one who has very specific rule critieria for their trades, yet does use their own judgement to grade the quality of the possible opportunity, as well as the markets they use it in, etc.

 

For those that are rule based discretionary traders, do you have a specific list of criteria that you use to determine if a potential opportunity is viable or not? does this list ever change over time, or from market to market? are there any absolutes in your plan such as "never take a trade if XYZ is happening", or "never trade the first 15 minutes of market open", etc. And if you do have these absolutes, how did you determine that they were appropriate for you to include in your plan? How often do you find you get "sloppy" and overlook details that may be pointing towards either taking or not taking a trade? For example, "this isn't STRICTLY an A+ pennant formation, but it's pretty good, and it's with the daily trend, so, good enough" etc.

 

3. Conceptual (pure discretionary) A conceptual or pure discretionary trader is one who may not have any specific rules or criteria for a trade, and will use their own judgement to determine which markets, which tools to use to best determine possible opportunities, and then may employ said tools quite differently depending on the situation. This is not to say that they have no plan... on the contrary, conceptual traders usually have a very comprehensive plan for their trades... it's just that each and every trade may have a completely unique plan just for it. They will often (but not always) use multiple disciplines of analysis to identify opportunities, and they generally view the big picture as it pertains to the markets they are trading.

 

For conceptual traders, Why not choose one of the other, more empirical forms of analysis to work with. Do you have any set rules for trading opportunities? or do your rules pertain primarily to risk management. Do you manage your trades as they are running? or do you set hard stop and target rules? Do you trade primarily using one style and time horizon? or do you have multiple styles that each have trades that resolve on completely different time horizons? such as daily scalping of the ES, but position trading emerging market bond funds, etc.

 

As for myself, i'm a conceptual trader. This works for because I find the other two approaches too restrictive, I also am looking for the best opportunties and by allowing myself to trade any market, for any reasons, it helps me find markets that are offering "once in a lifetime opportunties" on a regular basis. (i've had a short german bond trade on now since early/mid summer because I felt no other market provided quite the confluence of factors that the german bond market did for a short) And finally, there are days when I only feel like scalping, or swing trading, or investing in stocks,and on those days to have to work the market in a way that I don't feel like I find is counter productive.

 

So, what about you?

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Obsidian    10

Obsidian
Posted

When I started trading currencies I spent plenty of time to find a good strategy that I can code on metastock..some months later I decided that I can't fully automate a strategy because the market behavior, trends etc changes. Besides, there are movements which makes no sense on technical bases (caused by thin volumes during holidays or high volatility after a major news announcement).

Then I moved to next category. I had a strategy with sets of rules I followed...but that was no different than the first one..there is no difference between using a computer or your brain if you blindly follow the same rules...

Now I still follow a strategy but I know how to adapt myself to different market conditions, expectations...

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