What Type of Forex Trader Are you?


As most traders would know, good trading is all about having a good
trading psychology. For this, you need to understand yourself. There
is a famous Indian song which says that if you know what you are, if
you know what you can do and what you cannot do, if you know what your
limitations are, you can always succeed in life. Whatever happens to
you, you will never lose your self respect and you will always be
successful.

So, try to understand yourself and choose a trading method that is fit
for your psychology. There are basically traders who are scalpers and
traders who are medium to long term. Scalpers get in and get out of
markets very quickly. Their trades last for about an hour or lose and
their profits vary from 7-8 pips to 100 or more pips (if they are
lucky enough). They have a SL of mac 30-50 pips. Medium/long term
traders trade with a view of 1 week to several weeks Their TP is
hundreds of pips and so is their SL.

But what happens is, most traders cant stick to one trading
psychology. They start out thinking that they are scalpers looking for
10-15 pips. They do take a few trades as scalpers but find that after
they took profits, the trade went their way for several hundred pips.
So, next time they are tempted and wait a little longer but then
suddenly, the trade moves in the opposite direction and gets close to
their scalping SL. They suddenly start thinking like a medium term
trader. They think ‘why dont we let this run and maybe it would turn
back’. What happens ? even though they increase their SL, it still
gets hit and they lose 150 pips or more. Imagine losing 150 pips
aiming for a TP of 15 pips ??!!

Vice versa for medium term traders. They start off thinking to go for
medium term for SL and TP of more than hundred pips but when the trade
starts moving against them for 20 pips, they get scared and get out of
the trade only for the trade to turn around and hit their TP….Or
they get satisfied with just 20 pips profit and they start taking
their profit too soon.

All the above is perfectly the wrong way of trading. Decide what kind
of a trader you are and stick to it, whatever happens. If you are a
scalper like me, have small TP and SL and take them as and when you
see it. Dont bother about the trade after closing it. The more you
bother about a closed trade, the more it affects you psychologically.

So understand who you are and trade. And always follow the KISS
principle. Keep It Simple Stupid !!

By Karthik Subramanian Follow Karthik on Twitter.

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  • Emmanuel Ajewole

    I agree with all you’ve said. But how do I start claiming to be medium term trader when I’m not always sure whether my entry points are correct? It’s necessary to get it right from the beginning, then you can decide what kind of trader you are!

  • Patricio A.

    I’m using a sl of 40 pips average, looking for the same amount of profit minimun, but still having trouble with the closes, many times close a trade too soon or too late. Anyway I’m feeling good because I see the path of be profitable, part of this is because your help and the guys of WET. So thanks to all of us!!! 🙂