What are the most popular patterns of traders in the market?
Every day, the army of novice traders is replenished with hundreds of «recruits» around the world. Each of them has its motivation, a different amount of free time and a unique approach to trading. However, if we take the attitude to risk and the fear of loss of initial capital as a basis, then even such a motley audience of novice traders can be divided into two diametrically opposite groups.
«The Brave». Such traders start working on real money almost immediately, barely getting acquainted with the market. They have a calm attitude to risk: they are ready to open deals with the maximum leverage, and stop-loss orders either do not place at all or make them half the size of the deposit. These traders, as a rule, also have no fear of losing initial capital – they are initially ready to lose everything and deposit again.
«Careful». These traders either do not decide to open a real account at all, or open it, but then they can not make the first transaction for a very long time. There are even cases when a person takes money after performing only one or two operations, unable to withstand the psychological pressure. The reason for this behaviour is that the trader is initially not ready for risks and the thought of losing does not allow him to enter the market. Of course, a complete loss of capital is not out of the question – just a couple of stop losses can lead to the fact that a person closes the account and stops working.
Over time, some of the representatives of both groups leave the market, the second part practices the same approach but becomes less «radical», and the third part forms other large group-moderate traders. In the table below, we have tried to formalize all these categories concerning the most significant aspects of working in the financial markets.
|Main factors of trading||Aggressive traders||Moderate Traders||Conservative traders|
|A general approach to trading||Ready to carry additional risks to maximize profit||Strive to get an adequate profit with moderate risks||Sacrifice potential profits to minimize risks|
|Number of transactions||Large||Average||Small|
|Leverage size||Up to the maximum (from 1:50 to 1:500)||Moderate leverage (around 1:20)||Small leverage (1:5)|
|Risk per trade (Stop Loss)||Large stops, or do not put at all||Regular stops (3-5% of capital)||Small stops are transferred to breakeven as quickly as possible|
|Number of tools used||Lots of tools, preference for the most volatile||The average number of instruments, priority for assets with good dynamics||The average number of tools, priority – the most tested|
|Transaction duration||Scalping or intraday transactions||From intraday to two or three days||Medium-and long-term positions|
|Activity during high volatility||Maximum activity||Cautious trading||Avoids volatility at the time of opening new positions|
From this table, it is easy to guess that the riskiest and short-sighted approach is used by representatives of the first group-aggressive traders. However, this does not mean that such speculators are doomed to failure. After all, only two points can be criticized here: the size of the leverage and the risk per trade. If we approach these parameters to acceptable values, we will get an excellent strategy that can show high results in the long term.
Therefore, if you still haven’t found the optimal money management strategy for yourself, we hope that after reading this material, you will have fewer questions. And you need to work in the style that best suits your character. If you are by nature impatient and impulsive – conservative trading is contraindicated for you. And Vice versa – if you are willing to sit in the same position for weeks – try to use this as an advantage in the medium-term work. Matching your strategy to your personal qualities is an important component of successful trading.