Trading From Your Strengths

Peter Drucker, one of the world’s leading management consultants and writers, wrote that good managers walk into a room of various personalities and talents and work with the strengths of those in the room. They identify the resources of these individuals and have them use the best part of themselves to make the team work.

A good trader does the same with managing himself. He recognizes good choices for his trading that play to his strengths:

• The strategy he is going choose
• The time frame he is going to work with
• The amount of money he will use for his inventory
• The hours he will trade with real money
• The risk he is willing to take on each trade

 He should not only look at what will:

• Be the most prestigious
• Make him the most amount of money
• Be the easiest or fastest
• Be the choice of some other trader with dissimilar resources
• Be a black box system

Let’s look at strategies and the type of person who is suited to each strategy.

Investor trader

This is a person who perhaps likes the fundamentals of trading. Likes to look at the history of a company or commodity and does not want to be tied to decisions on a regular basis.

Swing trader

This is someone who is more comfortable making daily choices and does not want to be tied to a computer. He might have a full time job and only wants to spend a couple of hours a day trading.

Day trader

This is someone who needs the stimulation of making more decisions in a day and loves the process of watching a screen and managing a trade on a minute-to-minute basis.

Of course, there are those traders who mix and match these types of trading and have various of levels of commitment in time, number tof trades and percentage that will be traded at any given time.

Then there are those traders who are more suited for other types of trading:

Trading for an institution

This type of person must have a high education, connections or have proven themselves to be a highly skilled trader on their own. They like working with large amounts of money, can work in a corporate environment and are consistent.

Trading in a prop house

This is a good place for someone who can work with someone else’s rules and does not have enough money of their own. Very often they do have to put up the capital for their education with the prop house before they are given any money.

Money manager trader

This is a person who has good management skills, is a good salesman, or hires a good salesman and prefers to work with other people’s money. Money managers must have the skill of working with clients and is preferably risk adverse.

Money management is another consideration for a trader

A trader needs money to manage his finances, money for running his trading business as well as an inventory of money to trade. Based on the financial part of his business plan, he should decide when is the right time to let go of his full time job. He should only decide this after he has shown to himself that he is consistent in earning a living from his profits and has at least six months of living expenses in the bank.

Of course, there are those who are more conservative and will not trade until they build up more of a nest egg. Then there are those who throw caution to the wind and trade with every penny they have. The latter very seldom will make it without someone helping him financially.

Time and energy will make the difference in commitment choices

Trading time must be high-energy time if a trader wants to get the best out of himself. Making good choices in how you take care of your mind and body will determine how much high-energy time you have in a day. Also, other commitments of family, friends, work and other activities are energy time grabbers and must be considered for the type of trading that a trader can do successfully.

Calculated risk will make the difference in how fast you grow your capital

A trader must decide how much he is comfortable in risking with the strategy he has chosen to trade to receive its highest rewards. Then he has to see if he can manage that type of risk psychologically.

Conclusion

When a trader makes his initial choices for the direction he wants for his trading career, he needs to consider his strengths and weaknesses. Working with the resources he already has will give him an advantage to becoming a skilled and profitable trader in the shortest amount of time. 

Adrienne Toghraie coaches traders and investors to their next level of success by helping them overcome their self-imposed limitations. She has been a keynote speaker since 1989, author of 13 books, and owner of TradingOnTarget.com - Visit and sign up for a free newsletter.