What Type of Trader Are You?

There Are Two Extreme Types of Traders

Today, let’s talk about what type of trader you are. You might be wondering what I mean by that. In my mind, there are two distinct groups of traders and we’ll talk about both of them in this article.

This is actually a follow up on a previous article I wrote called, “The Traders Journey.” Check that one out first if you have a few minutes!

So let’s get to it: two extreme types of traders that I see all the time.

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 is the type of trader that thinks that the more information and knowledge they have, the more money they will make when trading. He or she wants to know EVERYTHING they can before placing a single trade. 

So they keep reading books, watching YouTube videos, and attending webinars. Everything revolves around gaining more knowledge, knowledge, knowledge! 

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

It’s the same as if somebody decided they wanted to run a marathon. They can read books and watch videos, know about the best way to prepare, what to eat, and even what to wear. 

Will any of this help him run the marathon? It could help. But he hasn’t run a single mile yet, and like trading, practice is what will help you succeed. 

And now onto…

The Type of Trader Who Doesn’t Know Anything

So here is the other extreme on the spectrum: the trader who doesn’t know anything. They will often act on a ‘hot stock tip’ from somebody they know. 

This type of trader buys a stock and doesn’t know anything about what they’ve bought.

Here’s an example:

So Edith heard about Snowflake (SNOW), which was one of the biggest IPOs of the last couple of years. When I mean big IPO, I mean it was one of the most hyped debuts on Wall Street in a long time. 

I actually even did a video about this when it was about to IPO: Should I Invest In Snowflake? Check it out if you want to learn how I approach IPOs. 

It was originally priced at about $85.00, but then it raised to $110.00. Of course, we don’t gain access at these prices. Once it hit the markets and started trading, it jumped right to $320.00!

And as we saw from the image above, Edith bought some at $243.00. When I asked her about her profit target, this was 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??? She bought 10 shares for $243.00, so that’s only $2,430.00. 

I don’t know how much homes in your area cost but let’s just say Edith can buy a place for $250,000.00. She would need Snowflake to rise from $243.00 to $25,000.00 for that to happen.

Sure, I’ll admit anything can happen in the markets but I’m willing to bet that this is not going to happen. At least not in my lifetime!

Which type of trader is right?

So now that we know the two different types of extreme traders, the question still remains: which of these two approaches is better for you? 

Are you better off gathering all of the information before you start trading? Or do you prefer to just buy stocks and hope for the best? 

I hope that by now you’ve realized it’s neither of these!

This is why I released The Traders Journey. I encourage you to check it out if you want to learn more about what kind of trader I am.

So in all seriousness, here is my advice to you.

Here’s the right approach in a nutshell:

1. Find a strategy that makes sense to you. This should balance the amount of risk you want to take, the time required to trade, and the win percentage and profits.  Many of you already know I love trading with The PowerX Strategy and The Wheel Strategy. I made a video in which I compare these 2 strategies according to five criteria. It’s called “The Best Trading Strategy”. 
2. Learn the rules of the strategy. 
3. Place at least 40 trades on a simulator. Practice running before your marathon. 
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. Nobody is a perfect trader no matter what they might tell you.

There are no guarantees that you will make money as a trader so the key is to always keep your losses small.

Summary

Let’s go over the two types of extreme traders: 

1. The trader that has $10,000.00 in his account and sees a loss of $100.00. That’s only 1% of his account but he’s freaking out. 

2. Then there is the type of trader who buys a stock and hopes for the best to happen. They don’t take any action or control their losses. Here’s an example of this: 

This trader invested $4,400.00 but is now down by $900.00. If this was the value of his account he’d be down by 20%! 

This is what ultimately kills a trader’s account: NOT controlling those losses. 

It’s like “hoping for the best” and believing that “everything will be fine” like this guy:

So what can we take away from all of this? 

Do yourself a favor right now:

Read The Traders Journey and follow the steps that I’m outlining in that article.

Then follow the five steps that I mentioned above:

1. Find a strategy that makes sense to you. Examples: The PowerX Strategy and The Wheel Strategy.
2. Learn the rules of the strategy or strategies. 
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 you find the trading strategy that works best for you!

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

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