Last updated on April 24th, 2020
When you tell people you are a trader, you are selling yourself short. While being a successful trader is an accomplishment by itself, you no doubt wear a few different hats in your trading business.
If you’re a discretionary trader, to give yourself the greatest possible chance of success requires the utilization of many different skills:
- Record keeper
- Trading psychologist
- Market researcher
- Risk manager
Any of these on their own takes a degree of skill to master and indeed people make whole careers out of each individual area. Yet a discretionary trader is required to be at least good at everything and preferably superb at one.
Wear One Hat At A Time
There is a time and place for each job you have but you can not and must not be the everything at the same time.
- Free thinking philosopher,
- Expert psychologist
- the student
These are all important to your success and yet they can end up in direct conflict with each other and put you into complete disarray. Working under pressure with seemingly confusing information at times is something which a trader needs to be able to do.
However, to do this successfully demands a consistent mental approach.
Your Mental Approach Is Vital
A trader intent on keeping the very best records to study and improve their trading methodology, may well end up missing trades altogether.
Perhaps they get into a trade having seen an entry trigger only to decide when they’re in the market, that actually they should be looking at this or that trading indicator instead of the original one and therefore risk parameters need to be adjusted on-the-fly.
How can this possibly be the most effective approach to trading?
It’s not and I’m sure that other traders would agree. The risk of psychological issues arising when attempting to deal with trading with conflicting mental approaches all at once is just too great.
So how can a trader hope to remain fully focused on the task at hand and play each different role as effectively as possible?
Awareness of the structure of trading comes first.
Without this, there’s no way of assigning tasks to the correct “person”. It could be very much looked at from a corporate point of view, they way most businesses work, just without all the other employees
Different Levels Of Responsibility
This is a loose generalization but you will no doubt understand the implications
Research & Development, Risk Management, Psychology Management
Level I contains the methodological planning “departments”. They are the brains of the operation who identify a trading edge and create a plan to take full advantage of it. They are the risk managers so that the business remains in business. They are the psychological support to the front line to maintain optimal efficiency.
Level II is charged with running the show. It’s responsible for planning each trading opportunity, monitoring developments in the markets and ensuring that risk and methodology procedures are adhered to at all times.
Level III are the workers. They are there to obey the orders given to them. To place the trades handed down to them by the “higher levels”. To remain focused on the trade and to stick to risk and methodology procedures. To control their psychology and control themselves is crucial to the execution of the plan.
Your One Person Show Has Many Characters
You understand now that there is a structure that needs to be in place for not only a successful business, but also for successful trading. Once there’s a structure in place and the responsibilities are assigned to each trading business“department”, it becomes much easier to know who should be where and when they should be there.
It also becomes clearer which departments are performing well and which are not. So do yourself a favor, set your trading up like a well-oiled machine or a military operation. “Split” your personality and make sure each part is active only at the appropriate moment for each task