When we pose the question to a group of traders; “what were your most memorable trades?” we’re often met with a variety of answers which mainly depend on where traders are on their personal development learning curve. The answers that we’ll receive back from: new traders, traders who have just begun to develop a trading plan together with a trading strategy that works or experienced and successful traders will differ remarkably. And it’s those crucial differences and what they represent that we want to concentrate on in this column entry.
The three different ‘trader groups’ we’ve identified for the purpose of this experimental article and the answers we receive back will highlight a lot about where we are as individual traders, what we recognise as proficient trading also changes remarkably as we mature as traders. For new traders they may highlight the first big win as their most memorable trade, whereas the more experienced traders in our community will have completely different criteria by which to judge their most successful trades. In fact the more experienced amongst us might even go so far as to highlight their biggest losing trades as their most memorable, as these trades provided more of a lesson than the winning ones. This would be particularly relevant if these losing trades were either as a consequence of poor money management, or poor money management led to a bigger loss than would otherwise have been suffered.
The reaction of new traders when posed with the question will probably be to recount the details on their most profitable trade, or their first major winning trade, or their most recent profitable trade. But when pushed on all the reasons why they took the trade, how they managed their money, the reasons why they exited etc., the details will be sketchy and incomplete, suggesting that the trade success is more by accident rather than design.
If we ask the new trader questions over their trading plan; “was the trade taken as part of their trading plan?” we’ll probably be met with blank stares. In short for many new traders the most memorable trades are created by luck more than design. However, stepping aside from the optimism that comes with successful trades perhaps it’s many of the losing trades that caused our traders to eventually sit up and take notice and to roll their sleeves up to begin to fashion a trading strategy and embed that strategy into a bullet proof trading plan, perhaps it really is the worst trades that we learned the most from in our early trading days.
The slightly more experienced traders will possibly begin to not only remember their most memorable trades but are far more likely to recall the reasons why they took the trade and moreover why those trades were successful. They may be beginning to experiment with various trading strategies and be inputting those strategies into what are the foundations of a trading plan. Our fledgling trader will still have a tendency to point to their most notable trades as being one that ‘bagged’ the most amount of pips etc.
Our more experienced traders may actually struggle to remember their most memorable trades as their judgment of what represents a more memorable trade will have altered considerably over recent years. Where once they’ll have enjoyed the experience of considerable pip gains in an individual trade, their criteria now for judging memorable trades may have changed somewhat to even include losing trades as being memorable if these trades were part of a defined trading plan and the loss was taken in lieu of a greater gain in the next trade. Our experienced trader may have distant memories of some of the more spectacular trades they took in their early career, but these trades will be recalled with a sense of nostalgia rather than any other emotion.
The real satisfaction for the more experienced trader will have very little to do with pip or points gain as the experienced trader is far more interested in the overall balance of their account and the targets they have set. If they’re executing their trades according to their trading plan and as a consequence are past the temptation to violate it, the winning and losing trades become less memorable versus the overall level of profitability. In fact a degree of worry might enter the experienced traders’ minds immediately after they’ve gained considerable pips or points particularly through trend/swing trading where the gains can be considerable, but the security may enter a period of consolation or ranging and exhibit what we term false readings.
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