You are not your entry strategy. If only I had a dime for every time someone has told me, “I’m a swing trader” or “I am a breakout trader” or—and this one is my favorite—”I am a contrarian.” Let me translate for you what each of one of these trading statements really mean.
“I am a swing trader.” This actually has two different meanings. First is “I enter trades and stay in them for anywhere from three to five days.” Okay, interesting, but does that mean there is some kind of alarm you set—an egg timer maybe—that goes off at a three- to five-day setting? And when it does go off, is it a mad scramble to the exit button? How do you determine if the trade is fully cooked at three days or five?
Second, and at least this one has more merit is “I am a trend trader.” Frankly, I have fewer issues with this translation as it is a partial truth. But first, how do you recognize a trending market? Sadly for most “swing traders or trend traders” every market is treated and thought to be a trending market, which we know of course is just not the case.
“I am a breakout trader.” To a breakout trader the whole world is a buy through a ceiling and a short through a floor. And if the markets were kind enough to consolidate and break out with that much predictability, everyone would be a trader, have six-pack abs, a full head of hair, and children that clean their room after finishing their homework every night. Breakout traders see the markets always as a coiled spring waiting to be sprung, and while this is actually an effective strategy in a sideways market, like any good strategy, it must start with the correct market cycle to be applicable.
“I am a contrarian.” Here’s the translation. “I pick tops and bottoms in trending markets mainly because I am not sure how to trade a trend and follow it. Instead, I choose a subtle form of revenge trading, looking to buy new lows and short new highs in between my hours of playing in oncoming traffic because I missed the move in the cable from 1.7000 to 2.1000.” The bottom line here is that you are not simply a swing, breakout, or contrarian trader. You are all three, and the market will tell you when you use which one . . . if you know what to look for.
“I am a swing trader.” This actually has two different meanings. First is “I enter trades and stay in them for anywhere from three to five days.” Okay, interesting, but does that mean there is some kind of alarm you set—an egg timer maybe—that goes off at a three- to five-day setting? And when it does go off, is it a mad scramble to the exit button? How do you determine if the trade is fully cooked at three days or five?
Second, and at least this one has more merit is “I am a trend trader.” Frankly, I have fewer issues with this translation as it is a partial truth. But first, how do you recognize a trending market? Sadly for most “swing traders or trend traders” every market is treated and thought to be a trending market, which we know of course is just not the case.
“I am a breakout trader.” To a breakout trader the whole world is a buy through a ceiling and a short through a floor. And if the markets were kind enough to consolidate and break out with that much predictability, everyone would be a trader, have six-pack abs, a full head of hair, and children that clean their room after finishing their homework every night. Breakout traders see the markets always as a coiled spring waiting to be sprung, and while this is actually an effective strategy in a sideways market, like any good strategy, it must start with the correct market cycle to be applicable.
“I am a contrarian.” Here’s the translation. “I pick tops and bottoms in trending markets mainly because I am not sure how to trade a trend and follow it. Instead, I choose a subtle form of revenge trading, looking to buy new lows and short new highs in between my hours of playing in oncoming traffic because I missed the move in the cable from 1.7000 to 2.1000.” The bottom line here is that you are not simply a swing, breakout, or contrarian trader. You are all three, and the market will tell you when you use which one . . . if you know what to look for.
