Have you ever heard the phrase “try and try until you succeed?” Well, I’ll let you in on a little secret.
Sometimes, this does not apply to trading.
One of the common mistakes new traders make is over trading. Afraid of missing out on opportunities to make money, they throw themselves into every little setup they see.
Don’t get me wrong, I believe you also have to be a risk taker in order to be a successful trader.
However, there is a big difference between making well-informed trading decisions and proper risk management versus reactively risking your money blindly on every little setup that comes your way.
This gun approach not only harms your account but also your psychological health. A typical scenario might happen like this:
After a losing trade, you see a new setup and decide to take it, thinking that it will be a winner and will make up for your loss. Cha bam! The market reverses and the trade turns out to be a losing trade. Now I’ve bruised your ego and calculating even more!
Instead of spreading yourself too thin, why not try to specialize first? That’s what Specialist trading all about.
Dubbed one of the best mixed martial artists of all time, Royce Gracie used his mastery of jiu-jitsu to defeat fighters from various disciplines. It’s all about discovering what you’re good at, and what your niche is.
To determine your trading niche, you must consider at least four factors. By identifying them, you will have better chances of matching the trades you make to your trading persona:
currency pairs
Each pair has its own behavioral tendencies and it is important to match your personality to the behaviors of the pairs you plan to trade.
For example, if you enjoy trading with a penchant for risk and if you like volatility, you will probably do well trading pairs like EUR/JPY and GBP/JPY.
timeframes
How much time can you devote to trading? What is the active trading session during your trading hours? Do you thrive in fast-paced environments? Are you able to make decisions quickly or do you need a lot of time and preparation before committing to trading?
These are questions that need to be answered to determine the ideal time frame for you and your niche.
trading framework
There are successful traders – from many years of experience – who make decisions based solely on intuition and courage. So unless you have done it and seen it all, making quick trading decisions may not end well for your account.
You need to develop a framework that makes sense to you to help you understand market behavior. And by using this framework (be it chart patterns, moving averages or trend lines), you can then make better trading decisions.
trading strategies
This basically deals with how you will trade your market framework once you know which behavioral trends make the most sense to you.
For example, if you are good at recognizing consolidation patterns, you will have to see if running breakout setups or range reversals will be more comfortable for you.
Some of you may be more comfortable trading the gradient markets while others prefer riding the trends. There are even traders who prefer to work with numbers and statistics rather than charts and candlestick patterns.
Keep in mind that the goal is not to close the doors and limit ourselves when doing specialized trading. On the contrary, we are doing this to grow as merchants.
It helps us overcome the risks of over-trading and paves the way for expanding our horizons in the future. So you see, the sky’s the limit once you’ve located yours – your very own corner of the sky!
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