Are You A Day Trading Warrior? Win Rate Matters
I listened to a motivational recording this morning by a well-intentioned trading coach. His message was that one’s attitude matters more than the number of wins. He said that he knew successful traders who have a 30% win rate (they lose on 70% of their trades). Of course, in that case one must keep the losses small… but this advice really misses a key point and therefore is misleading.
Over the 12 years I’ve been a trading coach I’ve come to believe that trading methods must be customized to fit the individual trader. This is a Catch 22, however, since most traders lack awareness of their trader personality. Without an effective personality model, a glance in the mirror sheds little light on the inner workings of the trader’s mind.
In the 5-Type Trader Personality model I use, only one trader Type, the Warrior, can tolerate a low win rate. These are the folks with very thick skins who make it a point of honor not to back down from a fight. They are the adversarial ‘pit bulls’ of trading legend and often there is a slight facial resemblance to that animal.
Warriors are natural-born leaders. When trading, assertiveness, even aggression, is their normal attitude and they never give up. If they have to take a loss, they rarely forget it (because they secretly resent it) and work hard to make it back. Revenge trading, therefore, is their most common pitfall. Among the Five Trader Personality Types they are the slowest to change and due to their stubbornness, most Warriors have blown up more than one account.
If this brief description doesn’t resonate with you, then you have a different personality profile. That means you will need a higher win rate in order not to get psychologically wounded by losses. The more sensitive you are, the higher the win rate needs to be. Otherwise, a variety of instinctual circuits in the brain will go on alert status and they will hijack your trading in order to save you… from yourself.
Darn… another Catch 22.
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Learn more about Reid’s coaching practice here.
