Trading psychology – Risk Comes First By Jack Wong This week, I am talking about trading personality. Some of you have full-time jobs that require you to work say 50 to 60 hours a week. Some of you may even have part-time jobs in addition to your full-time job. Thanks to the ever-rising cost of living in Singapore. It is human nature that at some point of you will be sick and tired of doing the same thing, and you move to the discomfort zone. You either avoid doing that thing or look for substitutes. Does it sound familiar to you? So, let me ask you these questions - Are you sick of your current full-time jobs? Do you want to fire your boss now? Some aspiring traders I know consider quitting their existing full-time jobs and trade full-time because they have “Yes” to the above questions. Now, hold on for a second and listen to what I am going to say to you before you become a full-time trader. Let me ask you this question. Do you know yourself well enough? You may say “of course I do. Who except me knows myself the best?” Let me share with you this. If you have yet to embark on your career as a trader, how do you know your trading personality? However, you must know your trading personality before you can trade successfully. This sounds like a catch-22 problem. But I trust you will find the following guidelines useful. First, do you see yourself sit in front of your computer and trade during the day (if you trade the Asian and European markets) and then do the same in the evening (if you trade the US market)? If your answer is ‘yes’, do you think it is actually worse than your full-time job in the sense that you can still get some sleep at night. So, it is a myth that a full-time trader must trade round the clock. You are a human being and you need rest. You have other commitments too. In fact, one of my trading buddies ever told me this. He said “a full-time trader does not need to trade full-time.” I absolutely agree with him. If you cannot imagine yourself sitting in front of your computer to watch the market every second, then short-term trading does not suit you. In this case, you should evaluate other trading methods that stretch the trading time frame further. Maybe position trading and swing trading are something you should consider. Now, let me now ask you this question. Do you like short term trades? Some of you will say yes because you can see the result faster, or you can make profit faster. Again, this is a myth. Short-term trades do not necessarily yield more profits than longer-term trades. In fact, there is no one method better the rest in the trading game. Suppose you are a coffee person and you need three cups a day. Are you supposed to finish three cups in a short period of time? So, trading is the same. You must find a time frame that suits your personality. Of course, you also need to weigh the pros and cons of the selected time frame because you must consider other personal and family commitments you have. You can find out more on Optionetics education by visiting our website at http://www.optionetics.com.sg. Jack Wong |