It is the amazing the number of similarities that you find between life and trading.  The more you learn from one, the more you can apply it to the other.  Life is full of adventures, successes, failures, trials, and errors.  Trading is full of its own ups, downs, cycles, waves, channels, drawdowns, and uncertainty.

Development Stages

Infancy 

Welcome to a new world where you touch, feel, stumble, and find your way around through trial and error.  During this stage of your development, guidance is needed to help you navigate and teach you lessons.  This is probably where you looked to the $97, $89, & $67 dollar miracle e-books that were going to make you an instant millionaire.

Childhood 

This is where you learn through exploration (different methods: range, trend, new trading, & etc.).  You have finally figured out that you need a real education.  So you enroll in your very first elementary school or trading dojo to teach you forex.  You have learned more about your surroundings/environment and also the participants in the world (market) around you.  This is the stage where you start to learn/create your own personality (system/method). 

Adolescence 

This stage is where you learn how the world works (market moves) and develop goals & ambitions of your own (new trading benchmarks).  This may be the point where you get your “first kiss” (big win).  You are more educated, consistent, but still a little rebellious (depending on what type of teen you were, lol) and don’t always follow the rules. 

Adulthood 

This is the stage where you become a success after graduation and become purely independent (mastering your craft, refining yourself through education, experience, and experimentation).  You know your history and are using it to move forward (thoroughly back-tested you system so there are no surprises).  You have learned to trust your gut/intuition and have mastered skills (chartist, tape reading, or fundamentals) and picked up characteristics such as confidence, self-sufficiency, and enthusiasm.

Uncertainty

As in trading and life we can never be certain about anything from your next trade to your next car wreck.  We accept the inevitability that we could lose our jobs, homes, and loved ones.  For some reason, people hold on to their trade ideas, certain that their market analysis is correct.  Even moving stops to give their losing trade more room to breathe (or lose).  So, accept the fact that you do not know where the market is going and you will be a much better trader.  Have the conviction to trade your beliefs but detach from the idea as soon as the market says otherwise.

As a trader we often ask who we are after we begin trading, when really we should know long before we start.  The kind of person you are has an effect on the way you trade.  Below is guide to help you find out a few things about yourself and your system.  If you find that your system and personality disagree it might be time to take a small break reevaluate and make some modifications.  Or if things are hectic in your life try to eliminate stress factors and this will more than likely improve your trading and attitude.

Time frames

• Day Trader (Intraday)
• Swing Trader (Daily to Weekly)
• Position Trader (Weekly to Monthly)

Method

• Fundamental Analysis
• Technical Analysis

1. Trend
2. Counter-trend
3. Both

• Hybrid (Fundamental & TA)

Risk Level

• Risk Averse
• Risk Tolerant
• Footloose (a.k.a. Risky)

Personality Type

• Emotional
• Mixed
• Robot
• Instinct/Gut (This may take years to develop)

Some questions you should probably ask to find out what type of trader you are.

1. What do I need to make me happy? (i.e. Large profits; steady equity curve; low drawdown)
2. What can my gut withstand while following my system?  (drawdown)
3. How and where am I comfortable exiting a losing trade?
4. How and where am I comfortable exiting a winning trade?
5. How much time do I want to commit to trading the markets daily?
6. What style of trading fits me?
7. Do I have any emotional conflicts in my life that could affect trading?
8. What goals do I have for my trading?  (The answer may change your time frame, time allocated, or risk level)
9. What FX pair(s) do I want to trade? (some have more volatility than others)
10. How does outside opinion (i.e. news, conversation, etc) affect my trading decisions?

Happy Trading,

Jeffrey Blackman