What Type Of Trader Are You?

24 Sep 2020

2 Extreme Types of Traders

So let’s talk about “What Type of trader are you?”

This is a follow up to my previous article, “The Traders Journey.”

So here’s what I’m seeing. There are 2 extreme types of traders.

The Type of Trader Who Wants to Know Everything

1.) This type of trader can’t get enough information. They’re like a ‘knowledge vacuum’!

This type of trader thinks that by knowing EVERYTHING they can, this will inevitably lead to them making money in the markets.

So he keeps reading books, watching YouTube videos, attends webinars…knowledge, knowledge, knowledge.

… and he hasn’t placed a single trade yet.

So think about it this way:

Let’s say there’s somebody who wants to run a marathon. So he starts reading books about it and watches videos.

He knows all about pacing, how he should train and what he needs to eat. He know the best shoes for running a marathon, and the best clothing…

…. but he hasn’t run a single mile yet.

Now onto…

The Type of Trader Who Doesn’t Know Anything

Now here’s the other extreme.

The other extreme is the “trader” who doesn’t know anything, but they got a “hot stock tip from somebody.”

This trader buys a stock and doesn’t know anything.

Here’s a real example:

Edith: I bought 10 shares of SNOW
Markus: I'm curious: At what price?
Edith: $243
Markus: So you're slightly down (for now). SNOW closed at $240 on Friday. Let's see what happens over the next few weeks. What is your profit target?
Edith: I'm new at this, so I don't know what to expect but would like to make at least a 25% profit. I always hope one or more of my stocks takes off and I could buy a new home on the proceeds but of course that's not reasonable

Edith has heard about SNOW, the biggest IPO of the year. It’s also the most hyped up IPO in a LONG time.

I did a video on this: Should I Invest In Snowflake?

It was originally priced at $85, then they raised the price to $110, and when it started trading, it jumped to $320!

So Edith bought some shares for $243.

And I asked her about the her profit target, and here’s her answer:

“I don’t know what to expect. I hope that one of my stocks really takes off and I could buy a new home.”

Wait…. What??? You bought 10 shares for $243, so that $2,430.

I don’t know what houses cost in your area, but let’s make it easy and say it’s $250,000.

So your shares would have to rise from $243 to $25,000 to make that happen!

And in the markets, obviously anything can happen…but do I see that happening. Well, not in my lifetime 😉

Which type of trader is right?

Of these two different types of extreme traders, the question still remains:

What’s right? Which of these 2 approaches should you use?

The “I want to know it all” approach or the “Let’s buy some stocks and see what happens” approach?

I hope you’ve by now realized that it’s neither.

That’s why I released The Traders Journey. You should really check it out.

Here’s the right approach in a nutshell:

1) Find a strategy that makes sense to you (risk, time required, win %,). Examples: The PowerX Strategy, The Wheel. I made a video in which I compare these 2 strategies according to 5 criteria. It’s called “The Best Trading Strategy 2020“
2) Learn the rules of the strategy
3) Place at least 40 trades on a simulator.
4) What are the results?
5) If it’s good, start trading it. If it’s bad, what can you do to improve?

Now one more thing:

When it comes to trading, YOU WILL HAVE LOSSES. No matter what they say, you will have winning trades, and you will have losing trades.

There are no guarantees that you will make money as a trader.

They key is to keep your losses small.

Summary

Now again, there’s 2 types of traders here:

1.) That’s the trader with a $10,000 account who sees a loss of $100. That’s 1% of his account. But he’s freaking out!
2.) Then there’s the other type of trader who buys a stock, and it moves against him. But he doesn’t take action. He doesn’t control his loss.

Here’s another example:

Sofwan: Sounds great. Can you do a video on Exxon Mobile, please?
Markus: Hi Sofwan, what exactly would you like to know? :)
Sofwan: I bought 100 shares at $44 for option trading. I can't do any trade and showing a loss of $900. Should I buy more to lower my initial price?

This trader invested $4,400 and is now down $900. That's 20% of the account! THIS is what kills traders. THIS is what destroys accounts, NOT controlling your losses.

It’s like “hoping for the best” and believing that “everything will be fine."

Do yourself a favor right now:

Check out The Traders Journey post and follow the steps that I’m outlining in that article.

Then do the 5 steps I mentioned above:

1) Find a strategy that makes sense to you. Examples: The PowerX Strategy, The Wheel
2) Learn the rules of the strategy
3) Place at least 40 trades on a simulator.
4) What are the results?
5) If it’s good, start trading it. If it’s bad, what can you do to improve?

I hope this helps.

Leave a comment below and let me know what type of trader you are.