Article /
08 August 2016 at 1:58 GMT
Personality a factor in trading approach
- There is a range of trading strategies, with many dependant on a trader's personality
- One approach is known as positional trading where risk management is key
- Profits should not 'come too far back' and losses should not be let to persist
By Max McKegg
That said, it must be recognised that “day-trading” and scalping greatly favours the “big players” for a multitude of reasons. This highlights an obvious dichotomy. If one’s personality type (or nature’s “gift”) conflicts with the realities of the marketplace, what do you do? Adapt, change or accept what transpires.
Style choice ... an individual's personality can be key to which end of the trading spectrum
they gravitate towards. Photo: iStock
they gravitate towards. Photo: iStock
Positional trades
Over the past three decades I have earned my living as a forex professional, providing trading forecasts to institutional as well as individual subscribers around the world as well as trading on my own account. It has been a highly rewarding experience financially but also in terms of quality of life, enabling me to work where, when and how I like. This has meant I've been able to provide a more than satisfactory living for my family over the years.
Furthermore, I have found it to be a thoroughly enjoyable way in which to earn a living and I still do (which is why I have no plans for retirement). My approach to trading is known as “positional trading”. I strongly emphasise risk/money management in my trading and while I am content to give a trade every reasonable chance of working out, I will not let profits “come too far back on me” and I never let losses persist.
In this way, losses (and there are plenty each year) are kept relatively low, relative to the winning trades that really work out. This gives me the essential edge required for long-term trading success.
Hi ho silver
Since bottoming at $13.62 in mid-December of last year, silver rallied in a series of impulsive (bullish) 5-wave sequences (from an Elliott Wave perspective) and on June 7 I bought silver at $16.41, in what I interpreted to be the early stages of a developing Wave (3) of Wave 3/ advance (typically the longest and strongest part of any trend sequence), with an initial stop loss at $15.78 (just below silver’s Wave (2) low, refer daily chart below). I was leveraged at 0.5:1, risking about 1.92% of my trading capital (refer daily chart below).
Silver daily
Source: ThomsonReuters
My upside objective for this trade was around the $21.00 level, since from a mathematical stand point, silver’s Wave (3) of Wave 3/ would equal Fibonacci 1.618 X Wave (1) of Wave 3/ at the $21.01 level. Pragmatically, catching “top tick” is always dangerous (even in the most ideal of situations) typically leaving plenty of reasons to lament later.
I continued to raise my stop loss as silver moved higher (as is my trading practice) and on July 4 my profit level of $20.87 was reached (refer daily chart below) yielding a net gain of around 13% on this positional trade; a favourable risk:reward of just over 6.5:1.
Silver daily
Source: ThomsonReuters. Create your own charts with SaxoTrader; click here to learn more
– Edited by Gayle Bryant
Max McKegg is managing director of Technical Research Limited. If you would like an email notice each time Max posts a trade or article then click here or post your comment below to engage with Saxo Bank's social trading platform.
