By David Adams
There are many styles, methods, and systems to trade the various e-mini contracts currently available. As a trader, you are in a position to decide what system is or style best suits your needs and abilities. It is my opinion that choosing a system that best meets your personality and psychological makeup is of prime importance.
Choosing a system to trade involves considering a wide variety of very important variables. Some of these variables are, but not limited to:
• Your personal investment objectives
• deciding upon the e-mini contract that is suited to your objectives
• evaluating and choosing a system that works with the e-mini contract you choose to trade
• evaluating your personality style and risk tolerance and match those variables with both your chosen system and chosen e-mini contract
• How much time do you want to spend in front of a computer screen?
As you might infer from the above mentioned bullet points, it is my opinion that the methodology you opt to trade and the contract on which you concentrate your efforts are closely linked to your personal personality type. I realize that this is a rather esoteric discussion, and only through time and experience can you truly make an educated decision on how to effectively trade the e-mini contracts.
For lack of a better example, I’m going to use myself as an example. I possess a reasonable amount of patience, but can become very impatient after a period of time. But to be sure, I would describe my personality in relation to trading closely as linked to immediate gratification. For me, then, holding contracts overnight is a stressful and uncomfortable feeling; so I am in cash every night. Year s ago I decided to concentrate my trading efforts on the intraday methodologies. As I got older (and I suspect I became less patient) I focused my trading efforts into an even tighter trading style called scalping. For me, scalping became the ideal vehicle for my trading efforts. I feel very comfortable scalping for a number of reasons:
• All my money is in cash at the close of every trading session
• I am in and out of trades in relatively short periods of time
• The results of my trading efforts are immediately available to me for evaluation
• By virtue of my short investment horizon, I feel comfortable in making trading decisions
• I risk only small portions of my trading account and losing trades (which are inevitable) but do not take an emotional toll beyond my risk tolerance
I want to point out that I am not advocating scalping as your trading style, but illustrating the decisions I made relative to my personality and risk tolerance, and choosing the scalping trading style. For example, more patient traders with large trading accounts may choose swing trading as their preferred style. Swing trading involves holding positions overnight for several days or longer. It is my opinion that swing trading can be more profitable than the scalping, but my psychological makeup does not allow me to be comfortable swing trading.
There are even methodology issues to consider in your trading. Will you confine yourself to being a strict technical trader? Will you base your trading on price action? You might also consider trading based upon the news and other fundamental factors. These are all important variables to consider when choosing the style of trading that best fits your needs.
As a final note, within each trading style there are dozens of variations and systems available. I am proficient in five or six different scalping styles, and there are dozens of scalp systems with which I am unfamiliar. Swing trading has a wide variety of variations in methodologies and systems available. As you can see, it takes a considerable amount of effort to refine your trading style and then adopt a methodology that fits within your psychological parameters. It’s no small task, yet I believe it is one of the most important variables in trading. If you are uncomfortable with the system you are using, your chances of success diminish.
In summary, we have discussed a number of variables that traders might consider when deciding how he or she will approach trading. I have stated my personal opinion that trading style and methodology are closely related to a trader’s psychological/emotional makeup. I have also stated that it takes a considerable amount of time and experience to understand which style and/or methodology you, as a trader, will be most comfortable. Finally, I believe that using a trading system in which you are uncomfortable may well lead to unprofitable trading.
About the Author
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