This article is intended to provide some spread trader types and profiles of traders that I have known. It is intended to be non-judgmental and non-committal, if a trader asked me if I thought they were Trader X I would not answer - I think this is for the trader to try to determine for themselves. I would prefer asking them which type that they think they are/or are not, and why AND how do they feel about it, what are they going to do about it [AND I suppose I would have to say something if I didn't think they were being honest with themselves - it's a character flaw of mine ].
But I have never met a trader, certainly including myself, who started spread trading and immediately became successful - AND who never had self doubts or wondered whether they should continue or not. When I started I was influenced by a trader, a very successful veteran with both floor and money management experience, who said that paper spread trading was for 'sissies', and acted as if trading psychology was a weakness that really wasn't related to spread trading itself. Luckily, I also got a terrific beginning trading education from this person that I eventually [about 1.5 years until I had 2 consecutive profitable weeks] became able to add to and develop a method that I could trade - after including paper spread trading and adjustment to the process, and after getting through my own 'group' of trading psychology issues.
A large number of the beginning spread trading issues and self doubt come from direction and commitment to the necessary time involved with learning - this is not like skiing where the beginners get to start on a 'flat' slope. A beginning trader taking their first real money trade, getting their data from some 'free' source, using a dial up modem or calling their trades into their broker to be sure 'they do it right' - is spread trading with the elite 10% who are directly connected to the exchange both for their data feed and spread trading platform AND are spread trading a plan that they have executed 1000s of times without hesitation and without concern that they may lose.
For the first time, believe it or not, I seriously felt like giving up spread trading entirely - hey, if I cannot do it, recognize this & move on. So before going to bed, ready for a clear intuitive response to quit...it could not have been clearer.. .
Trader A is not going to make it as a trader. Whether this has to do with general intelligence or work ethic is irrelevant, there is just no insight or aptitude to what is involved or necessary to trade, and I suppose in some cases the trader is just oblivious to the kind of thought processes that a trader needs to develop. Regardless of how much study is done, it just isn't absorbed - it just doesn't make sense. This person cannot ask contextual questions and invariably any question asked to them is going to be answered 'wrong'. As result, this person is unable to come up with a 'plan' to paper trade, let alone paper trade the plan profitably as part of the progression to real money spread trading.
Is this time and growth OR is this inherent, if the later then this should be accepted, and this person should move on to something else. I will say that I have only met a few people that fit a profile where I thought that it wouldn't matter what they did, it just wasn't going to 'get through'. On the other hand I have met a number of traders who have these characteristics, and actually have felt that they just don't work hard enough or directed enough, and it becomes more of a commitment issue then learning issue at least in the beginning. For instance, printing out some charts at the end of the day that you then stick into a notebook as your 'record' of that day is not what I would think of studying.
With regards to music I am Trader A, and unfortunately this is something that I wish I had as a part of my life in some capacity. I remember taking guitar lessons when I was a kid, and the teacher wanted me to tap my foot while I was 'picking' chords, so much for the guitar. And then when I was in college, all the pledges in our fraternity had to participate in a program called IU Sing, except for myself as I was so inept that they didn't even want me to stand with the group and lip synch.
Trader B is not making it as a trader because of psychology. It doesn't matter how much they study or how hard they work, and this trader is actually able to profitably paper trade, but when it comes to real money spread trading everything that they 'know' is replaced by emotional response where the trader either won't take the trade, or once in a trade they won't manage their method. This has to be accepted AND not in the context that there is something 'wrong' with this person, or that this is a 'comment' on the core person; unfortunately trading involves a lot of emotion - some people can learn to control the emotion, but some people will always be controlled by the emotion.
But should this person quit spread trading? This is a very difficult question both for me or the trader to answer. I have known people where there was so much psychological baggage that I just knew in my gut that they wouldn't get through it, but on the other hand I have known people who I really felt could make it because they were strong enough in methodology that they could come to use this to control the psychology. AND in my mind this becomes the ultimate trading psychology control, where the trader learns their method and then gains confidence by proficiently paper spread trading it - and this in turn allows the trader to emotionally accept that it's alright to extend risk on something that they can never control or know the outcome for, because they can know what they are going to do and how they are going to act.
So I would answer this as a function of the extent of the impact that the emotion and anxiety of spread trading is having on the person. For instance, is it just undermining their ability to trade and if they could gain some control they feel that they could trade - then I would answer no, but if instead spread trading was ruining their life, health, and relationships - then I would answer yes.
Something that I would also consider is that of a Trader A/Trader B combination, where there is the trading psychology problems but without the methodology understanding to use to attempt to control them. This situation is especially problematic because if the trader can't acknowledge the Trader A 'characteristic', then they aren't going to know what the underlying problems are; I think this combination is common.
I would point out that I have found spread trading psychology to become a predominant issue in the transition from 'profitable' paper spread trading to 'real' money spread trading, as traders find that they lose 'real' money. For this reason I strongly suggest that paper traders consider proficiency instead of profitability, meaning that being net profitable isn't enough - the trader must gain a profit related to the gains that their setups provided. For instance, a trader's setups could have given a 10 point profit, but the trader only gained 2 points, and this is on paper. This trader may be profitable, but they are not proficient - I would consider 6-7 points out of a 10 point potential being both profitable and proficient.
Also, is there some way to add emotion to paper spread trading - my answer is yes AND I challenge a paper trader to post all of their trades including entry, partial profit, and exit immediately upon trigger in a chat room instead of in their simulator - after being paper spread trading proficient BUT before spread trading real money. See what happens when you let the 'world' see what you are doing, and if emotion takes over as you have one of those series of 5 losses in a row and still have to post that next trade - I think that you will find this very difficult to do, and a very beneficial experience.
Trader C does not want to be a trader, and they don't want to trade - they want to realize financial reward from spread trading, and they certainly like 'saying' that they are a trader. This trader is not interested in learning or education, as they go from signal service to signal service trying to 'piggyback' someone else's trades, continuing to lose, but continuing nonetheless as they search for the next signal service or the next holy grail.
As you read this, please note that my comments are on the motivations and reasons behind this trader type's actions, along with the impact and 'hurt' from continual loss from doing so AND how this would relate to the question - should the person quit spread trading. My answer to the type as described would be yes - along with the mention that IF spread trading was so easy that all a person had to do was go find someone else to 'piggyback', then there would be a lot of very rich traders, and the statistic about 80%-90% of traders losing would not exist.
Trader D wants to be a trader - they just don't want to have to trade. I think of this trader like a cousin of mine, who graduated from an Ivy League school with honors - in seven years after accumulating 3 different majors. She was very smart and capable, wanted to be very well educated and prepared for the workplace - she just didn't want to work.
The traders that I have met that I would refer to as Trader D tend to be those who may have 'retired' or have other sources of income and are intrigued by spread trading, and the 'extra' money would be nice, but find that they don't like the discomfort related to spread trading and just simply don't real money spread trade regardless of how well they may have done paper spread trading. Very possibly this trader would incur Trader A or Trader B characteristics, but in and of itself the issue that Trader D would have would be a lack of motivation or reason to trade.
Should this trader quit really isn't an issue if they don't trade real money or do so in such a minimal fashion that they may even regard it as the 'cost of a hobby' - I think this is part of the answer to the question regarding why do otherwise successful people lose as traders.
Chances are they will quit at some point in time from boredom, or after finding something new to spend time at. Quitting becomes an issue, if motivation and determination come to the forefront and replace the 'hobby' mentality. Then the trader has to recognize the other type issues, and especially not think about trading as something that they 'should' be able to do because of all the other successes they had - they are not related.
Trader E has to be a trader - not because they feel that trading is their 'calling' BUT because they either don't have a job or don't make enough money at the job they have AND they 'need' the money. Again it's possible that Trader A characteristics can be involved, but almost assuredly Trader B characteristics will be involved, as one of the predominant trading psychology issues is the fear of losing and this would be magnified for Trader E; the combination of needing money but being afraid to lose is an untenable situation.
Should this trader quit because they are undercapitalized - absolutely not, this has nothing to do with the ability to learn. However, this trader OR anyone who is trading money they don't feel that they can lose - what is referred to as trading 'scared' money - has to accept their situation, and that no one is going to become a profitable trader because they need a 'job', it's just not going to happen. This is a time to learn, and a time to try to get some kind of work to raise some money that the trader can afford to lose - this is NOT a time to develop bad trading habits and trading psychology issues that may not be able to be resolved at a later time..
Trader F is a trader I just can't figure out, probably because they are a 'mixture' of all the trader types. However, there is one additional characteristic I have seen in Trader E: this trader 'talks' about all the things that they are going to do, and all the changes that they are going to make - but never does. Consequently, whether they have the aptitude or the potential to become a profitable trader never becomes a relevant issue, because for whatever reason, there is no follow through or 'real' commitment to change on the part of this trader. They just keep on doing the same things and 'talking the same talk' - as if these changes are going to take place by themselves. WHY is this? WHY go through the pain, frustration, and losses - when the trader apparently has some concept of the cause to their problems in order to make their plan of change - but then do nothing? Is this what is referred to as sabotage, where a trader wants to be 'forced' out of trading, but doesn't want to have to say they quit? Again, as I started with this 'profile' - I cannot figure this type out.
Should this trader quit isn't really an issue to me - attrition from losing, and really doing nothing about it when maybe they could, will be the ultimate answer.
Trader G wants to be a trader and wants to trade. They do not have TraderA characteristics either in terms of lack of aptitude in general OR in terms of work/study ethic in specific. They 'get-it' AND they work their butts off - BUT the losses continue.
I would think that anyone who eventually becomes a profitable trader is Trader G at their beginning. In the absence of some of the more problematic characteristics described above, this can be a function of what is being done to learn-study-practice-adjust AND the time necessary to create repetition and meaningful screen time. Do everything possible to make good trading habits and not let trading psychology takeover AND KEEP AT IT - this trader has no reason to quit as long as they retain their commitment, and as long as they can keep their trading development in perspective.
Certainly there are additional trader types and characteristics related to trading and losing, trading and reasons for losing. My intentions were not to try to make a complete list, but to bring up this issue about whether a person/trader should quit AND some of the things involved with answering that question in terms of honest self assessment.
I was executing reasonably well, but ended up just so: a couple of whipsaws each losing 3 x 5ticks or so, then feeling tired and fed up by switching to the er2 and taking two trades which got bungeed (and even didn't look like such bad trades, but I gave both 7 ticks of risk which was too much relative to my profit and lossl for the day), so two times 3 x 7t = another 42 ticks down the drain and from + to -$500.
For the first time, believe it or not, I seriously felt like giving up trading entirely - hey, if I cannot do it, recognize this & move on. So before going to bed, ready for a clear intuitive response to quit...it could not have been clearer... CONTINUE... what was that about "You can check in any time you like, but you can never leave..." Study, more study, much more discipline, define those setups until they are all crystal clear real time (they are not !) and trade at my own pace.
I hope this is exactly what you do. Why quit IF this is exactly what you plan to do and will do, including going back to the beginning of your learning progression which includes proficient paper trading before real money trading - there is a conflict between saying that your setups aren't clear BUT you are trading real money, and especially if you are losing.
Questions I would ask regarding your email: What was your proficiency of your gains up until the point you started losing - should they have covered the losses? Were the trades 'plan' trades that loss, the email indicates that you felt they were ok? If the answer was yes then its unfortunate, but it is part of trading and risk acceptance; I do want to mention that your comment about loss and risk relative to your profit and loss for the day is in my mind trade irrelevant, as the components of your setup should be the determinant of risk. If you continued trading 'your' plan, would you have then gone back ahead and had a winning day? I know the day you have referenced - the answer is yes.
Good Luck with your spread trading AND follow through!
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