The financial markets are an uncertain world. Many unforeseen events have been known to happen, and potential problems may lie in wait for you on any trade. How do you deal with these adverse realities? Successful traders, IMO, tend to focus particular attention to maintaining control in the uncertain financial world. Certainly emotional control is one small aspect of this. Being able to stay rational during times of stress can avoid a nasty blowup which might result from a hasty emotional decision. The biggest element of control for a trader must be risk control. The spectacular blowup of Long Term Capital Management provides one example of what can happen when a trader (or firm) loses control. Many may think that the lessons of LTCM are not applicable to their small trading operation. From my understanding of the LTCM blowup, the fund lost control when their positions became too large within the markets they were trading. They seemed to <b>become</b> the market in many of the securities they traded. As a result, they were unable to exit positions without massively moving the market against themselves. Most small traders might not ever run into this situation. However, as a trader becomes more successful, this is a situation that requires caution. For example, a trader building a 10,000 share position in a stock with an average daily volume of 100k shares can effectively become stuck in the trade if it begins to go against them. To maintain control, a trader should limit their maximum position size, potentially as a maximum percentage of the average daily volume for the stock. Similarly, an active trader would typically be silly to establish a 2000 share position in a stock with an average daily volume of 10,000 shares. You lose control. You would only be able to get out of the position is someone 'lets' you out, otherwise, the liquidity is just not there. This is not the only way a relatively small trader can lose control in their trading. Some traders take very concentrated positions in individual stocks. For example, let's assume a good trader has a very solid system that buys stocks on declines (or shorts on rallies). This young, but experienced, trader trades a $250k retail account containing most of his net worth, giving him a daytrading buying power of $1M. While watching stock ABC begin to decline sharply from it's open of $60, this trader begins to load up on a position in the mid 50's, and adds to the position as it declines to 50. The stock is now down 20% on the day, and ripe for a bounce (or so says the system the trader has been profitably using). At this point, the trader is holding 5k shares at an average price of $53. Down 15k on the trade, it's not looking like a good day. ("Bounce dammit!!") Unfortunately, after consolidating at around $50, the stock breaks down and starts sliding down through 49, 48, 47 and stabilizes around 46. Following his system the trader adds another 5k shares on this further decline, and now holds 10k shares at an average price of $50 (still only half of his buying power of 1M). Note that this is an extremely liquid stock, and 10k shares can be easily bought or sold with minimal slippage. Unfortunately, suddenly and without warning, the stock is halted! As it turns out, the FBI has been investigating a possible major fraud at the firm. When the stock reopens for trading the next day, it begins trading at $11 per share. This otherwise successful trader, using a solid system, has lost $390,000, leaving a debit balance of $140,000 in his account. His life is now screwed, his trading career is now screwed. What happened? He lost control of the situation. He allowed an unlikely event to ruin his life. Bad luck? Sure. But, it was within his control to prevent that foreseeable, but unlikely, event from ruining him. To protect himself, he should have had a limit on the maximum position size allowable, as a percentage of his account equity (or net worth, or whatever). Think of all of the nightmare scenarios from your trading knowledge. They likely all resulted in a trader losing control of the situation they were in. Brian Hunter at Amaranth Advisors (got way to big in natural gas markets), AIG (got way to big in writing CDS contract, and probably much more), LTCM, Bear Sterns/Lehman (too big of positions - too much leverage). I would encourage trades of all size to reflect on your trading, and imagine any scenario in which you might lose control. Then, think of solutions you might implement to minimize that risk. One blowup can end a career and ruin a life. Maintain control.
For what it's worth, this is what my test results page said: "You tend to earn your success by being thorough, methodical, systematic, organized, and dependable. You are also realistic and responsible as long as things make sense for you. You probably decide logically what needs to be done and work toward it little by little until you are finished. One of Your Trading Strengths - You should be really good at data analysis/developing business plans especially when someone provides you with the exact steps to take. One of Your Trading Challenges - You can be overly critical and only notice the negatives in your trading. If you do not learn to recognize your mistakes, you could become stuck."
I tend to agree. Part marketing, and part research. Some of the questions can be combined to know if you are a full time successful trader (by your answering that you are), and so your replies on the other questions might be a research project to determine what kind of personality traits are more likely to lead to success. It would be nice if the website would publish their findings, although they will more likely use their findings in their consulting or education business. I certainly would not place any significance on the test 'results' (seems more like a horoscope for traders).
i took the test , apparantly I'm a strategic trader , but more worringly it also concluded that i'm pregnant
You are probably flexible and pragmatic, focusing on immediate results. You are very good at follow through and tying up loose ends, which really helps you as a trader. In addition, you are good at figuring out cause and effect situations and analyzing details into logical principles. One of Your Trading Strengths - You would be great at evaluating what makes a good system. One of Your Trading Challenges - You like adventure and excitement. If you look for it in the markets, it would be a disaster. It also said ps you are an asshole... this does not deeply offend me
I am a Socially Responsible Trader. "You tend to be quick at seeing the possibilities, meaning that you can easily find opportunities in the market. You are driven by your values and are committed to them. You also tend to be adaptable and flexible and accepting of what happens unless it threatens one of your values." One of Your Trading Strengths - You are probably flexible enough to look for multiple systems and blend them to achieve your trading objectives. One of Your Trading Challenges - Undercapitalization. (Contact EricP for assistance.)
Mine âYou are an innovative traderâ âYou are adept at generating conceptual possibilities and then analyzing them strategically. Your goal is to understand the world, constantly absorbing new information that comes your way. You then process all of this through your intuition to size up what is going on around you quicklyâ. One of Your Trading Strengths â âYou like the challenge of sorting out market conditions and seeing where you fit and can be competitive in the markets.â One of Your Trading Challenges â âYou may find yourself making emotional decisions when under stress (with dramatic consequences). â RN
thats nothing ,mine said " you are a wonderfully shrewed, imaginative and streetwise trader , please send $5 to above adress "