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With summer doldrums in full force, as everyone lazes away the final few days of vacation, I thought it was good time to rerun this piece.
The other day my friend Jamie Saettele posted on Twitter that he made 180 pips on the recent EURUSD rise, to which I replied , “Me too, but mine were in 5 pips increments 🙂 . “ Jamie and I have been friends for a long time but agree on almost nothing. He is a solid Midwest conservative and I am the quintessential Northeast liberal. He trades almost exclusively off technicals favoring the arcana of Elliot Wave while ignoring all headlines. I almost always try to follow the story of the day and look at price action to support my decision.
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Most importantly Jamie is a decidedly long ball hitter while I will chip and bunt and scratch my way to the plate. Jamie’s trades are often multi-hundred point affairs that can last days and sometimes weeks. Mine rarely exceed 10 points and rarely take more than a few hours to resolve. Despite the differences we both manage to do ok. As Jamie tweeted back, “There are many ways to play the game.”
In trading there are indeed many ways to play the game, but there is only true way to success. You either trade scared or you trade greedy. In trading neither one of those terms is used pejoratively but is simply an honest assessment of your personal style. I, for example, will never make hundreds of pips from a trade. I simply don’t have the mindset to press my position. On the other hand I will never, ever lose more than 50 points on any trade. In short I am always trading scared. I am perfectly happy to increase my account by 5 pips at a time. That may seem arduous and tedious to some of you, but its perfectly fine for me.
Jamie on the other hand can milk the trade with enormous patience. He is perfectly happy trading “greedy” and although I haven’t looked at his account in ages I am sure his equity swings are much larger than mine. He may make in one trade what I make in fifty.
The point however, is that you need to know what kind of a trader you will be. You can trade scared or you can trade greedy, but you can’t do both. That’s the number one problem of any novice trader. They try to be greedy when it comes to profits and scared when it comes to losses. Alas it just doesn’t work that way. As Clint Eastwood once said, “A man’s got to know his limitations.” A trader must do the same.