Ep 111: Your Trading Profile and Match for YOUR Trading Style & Risk Profile

November 17th, 2016

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Hey, this is Sasha Evdakov.

Today we're going to look more about your trading profile. Taking a look at yourself and finding a match is vital.

When you look at any profile anything that you do in the market, it all comes down to finding your match. It's essential to find something that is working for you.

You're a Unique Individual - Find Your Match

You are not the same as everybody else as much as you want to believe it. If you're looking at day trading, you're probably a different day trader. Maybe you're looking at penny stocks. Well, you're probably a different type of penny stock trader.

If you're a swing trader or long term investor, you're probably a long-term investor that's different from another person.

You need to know that in life it's important:

  • to find your match
  • to choose a vehicle
  • choose a relationship

Everybody's different. Your preference is different than another person. And it's, in the end, your goal is to find that perfect match and to figure it out in what's going to work for you.

You need to find what works for your trading style, risk management, education level. Focus on things you're attracted to and create a system and strategy that works for you.

We'll Go Through This Together

That's what we'll be talking about in this lesson. We will do an example of cars. We'll take a look at doing an instance of your risk tolerance.

I'll also give you some breakdowns about trading profiles that you could use to create your trading profile.

It's not going to be specific to any one individual because obviously, you are different than somebody else. But it's going to give you some things to think about creating the trading profile that works for you.

We'll take into account your:

  • risk tolerance
  • education level
  • style

And we'll combine those things along with managing your risk and making it together and creating a profile that's yours.

Honesty is the Vital Part For Successful Trader

To be successful in figuring out your trading profile, you need to look in the mirror. You need to be honest with yourself.

I always typically mention this case. If you're the type of person that's still late, but you believe to be on time - you got to be honest with yourself. You have to tell the truth.

Also, if you're the type of person that loves to race through traffic and cars in and out if you're blasting through red lights, then you need to be honest with yourself about those things.

You're doing some crazy and dangerous things, and you have to look at the mirror and be honest with yourself.

That's important, especially in trading. It's going to reflect in your trading account. You're going to see the losses. If you're not honest with yourself when it comes to trading, you're going to see the result that you won't like.

You're going to see it right in your account as you're making trades. It's going to be a reflection of how honest you are with yourself. That's what we're going to do in this week's lesson. We'll focus on your trading profile because your profile is going to be different than anyone else's.

Real-life examples - Easy to Relate With

Before we take a look at this on trading and how it relates to trading, let's take a look at something more realistic. I think most people can relate to or apply these concepts.

There're three different types of vehicles. We have a hybrid car, a convertible and we have a truck.

If you were to choose one of these vehicles which one would you choose?

Some people would probably choose the hybrid. Other people might prefer the convertible. And some people would choose the truck.

The hybrid is good on gas mileage. That means if you're taking a trip, and want to save money on the gas, the hybrid would be the way to go.

If you want more fun and adventure, you might decide to go with the convertible. And some people would choose a truck because it might be better for hauling wood and picking up things.

The thing to remember: Everybody is different when they're looking at purchasing a vehicle.

Narrowing Things Down

As you get into this and let's say we're now taking a look at things of just the trucks.

Now when you look at this spread of trucks, if you're interested in trucks, you have:

  • a Nissan truck
  • a Dodge truck
  • a Ford truck
  • a Chevy truck
  • a Toyota truck

There're all kinds of trucks that you could choose from. You're starting to narrow things down. We started from a base concept. Now, as you continue to narrow things down, you have this choice that you could choose from.

You're starting to narrow things down.

  • But which one do you choose even if you're interested in a truck?

There's still a lot of choices out there. Looking at this, you have five different options. And even from there you have modifications that you could go with. There are modifications such as leather, sunroof, or something like that.

You continue to narrow these things down. For everybody, it's going to be much different on what they choose. That's because of their preference and goals.

It's all about their situation and desires. Everyone is different. For you, it's essential to find your match. Find out what's working for you.

Take Into Account Age Group

You might have a very young person, a middle-aged person, and an older person. When you're young, you're not even worried or concerned about investing. Or if you are, then your risk tolerance could be much higher.

As you get to be a little bit more middle-aged, then now you're a bit more conservative. You're not as conservative as somebody a lot older, but you're a bit more traditional.

You have your solid foundation, lifestyle, and so forth.

When you become older things change. Let's say you're in your retirement age. Then you might be extremely conservative or risk-averse as you become a grandparent. Or as you in your retirement stage. That is the time when you don't have the years or the time to make up any losses or for growth in income. You're looking for more stability.

If you're looking at your age bracket, things are going to change. Things are going to vary depending on your risk tolerance. Now I can't categorize that everybody young is going to be aggressive. It doesn't work that way.

It doesn't work that everybody who's old is also conservative. In theory, the majority it does work out that way.

Top Tip: But in general you're looking in the mirror to see what type of risk tolerance can you handle. Someone who's even young or middle-aged might be trading or investing or might be extremely conservative because they don't like the risk. That is their natural character and their real personality.

What about Risk & Style?

It's imperative for you to analyze your risk. Understanding your risk and risk tolerance is the key.

Answer these short questions:

  • are you a low-risk person?
  • are you medium or average risk person?
  • are you a person who likes to take the high risk?

Be honest with yourself and answer which one are you. You're trying to find something that's a match for you.

That's the end key. You're trying to figure out where you are in terms of your risk level. And then what you're trying to do is also match up your trading style.

As you start to look at things a little bit further, you're also going to look at your style. You're going to look at the type of thing that works for you.

That means that you are maybe:

  • a day trader
  • a swing trader
  • a long-term investor
  • an options trader
  • forex trader

This is the style or the type of investments that you're going to do. Now is the time to find your combination. Maybe you are a person with low risk that wants long-term investing. Or you are low risk but like the fact of day trading.

Maybe you are more of a high-risk who wants to day trade or trade options. There is a tremendous amount of combination. You're trying to find your match. That's the goal.

Even within these levels, you have little sub levels. You can't define it to specific. However, insurance companies attempt to do this assessment and ensure you. They try to assign you a number or risk value.

In general, for trading purposes, you're going to be at different list risk levels. This will change within your life.

Take a spectrum and see where is it that you fall into place from low to high risk. And the same thing as you get into the style.

As you get into day trading, swing trading or long term investing, there's going to be different levels. And there's the same thing with options. You'll have different levels within those stages.

Example - Day Trader

Take a look at the case if you're a day trader.

As you're a day trader depending on your risk level are you a person who's into trading:

  • penny stocks
  • blue chip companies
  • new or IPO based companies

You have different styles within a significant style. It's about narrowing things down and finding a match that works for you. The issue that happens with many people is they're in the wrong vehicle. They're doing the wrong thing.

Choosing Vehicles & Trading Style

We can look into this in terms of the vehicles. Take each car as the stock or the style or the type of trading that you should be doing.

Many people should be in a hybrid, but maybe a hybrid is not cool enough. Perhaps the social factor behind it stinks, or you're not interested in a hybrid. It's not cool amongst your friends or your peers or the people you associate with. In that case, you want a convertible.

The same thing could be with an SUV or van. Let's say you're a parent. There's no way you're going to catch me inside a van even though the van is the right vehicle for you as a parent.

Whatever your story, it doesn't matter. That's social triggering that's playing an effect on you. And it's not the right match for you.

  • Ask yourself what makes the most sense for you?

That's what you need to do. Look in the mirror and look at trading as a business and tell what's right for you.

In the end, if you're driving the wrong vehicle, there are some caveats to that. Let's say you're choosing between a hybrid and a truck. For you, a hybrid is not cool enough. You want to go with a truck.

This is what happens in that scenario:

  • it's more expensive
  • it's more expensive to fuel up
  • it's more costly to fix potentially
  • it's more difficult to park
  • it's more difficult to drive it

The same thing goes with a van versus an SUV. If you're looking at being a parent, you want to seat more people. A van can seat more people. But an SUV seems cooler, and it appears cooler. You know that the engine might be the same people opted to go with the SUV.

Even though the performance might be slightly different, the cost of the SUV might be that much more. You're paying for that prestige. You're getting in the wrong vehicle based on the requirements that you need.

You're doing it based on social factors. And this is how people trade as they look into getting into trades.

Making The Right Choice

I have seen people get into trading penny stocks only because of an email. They've heard of something that comes into the email, and they think this is the stock they should get into.

I've seen people trade different blue-chip stocks because they've seen things on TV. Not because that's what they should be training, but because this is what people on TV are talking about.

This is what happens. People get into these things even though they shouldn't be trading these. If you're the person that should be trading blue-chip stocks and blue-chip companies, then that's what you need to focus on. That's to your core.

Maybe you're not a day trader. Perhaps you're more of a swing trader, and you have a calmer personality where you have a slower investment tolerance. Then you might want to stick to swing trading the blue-chip stocks. You need to find that match of what works for you.

Take a Look at Creating Trading Profile

Here's how to create a trading profile for yourself.

I'm just using a few different things:

  • risk level
  • style
  • comfort area
  • education
  • managing trades

If you look at this, you'll slowly start coming up with your trading profile. It's crucial for you to be honest with yourself when you're looking at this.

Maybe you're the type of person that's always late to dinner and you're telling yourself you're still on time. You're not going to get a proper trading profile.

You won't be honest with yourself as well. It's crucial that you're able to see yourself in a real way.  The first key question is knowing your risk level. Look at it on a spectrum.

  • Where do you fall into play?

As I mentioned earlier if you're a little bit older, you'll probably fall into the no risk or minimal risk area. If you're a little bit younger, you might fall into a high-risk area.

The younger you are, the higher the risk you'll be able to take on. You have time to make up that difference.  Here comes down to personal preference - style.

  • What is it that you typically want to trade like?

You might have a day trader, swing trader, long-term investor. It could be an options-related style. Within these, it breaks things apart right. You could go deeper within your style. You could say I'm a day trader only for penny stocks. I'm a day trader only for a big cap. I'm a swing trader for the top five leading companies - like Apple, Google, and Netflix.

If that's your style by all means, then you can define it. But you go deeper within your method.

Next would be, comfort area:

  • Is it a low dollar amount?
  • Is it more the tech companies?
  • Is it more the bio companies?
  • Is it more the healthcare companies?
  • Is it the high dollar companies?
  • Are companies with good fundamentals?

Determine what your comfort area is. This typically relates to your education. The more knowledge that you have in a particular area or, the more that you've spent time within that area you will gravitate more to that area.

If you watched more videos of people or followed people that are more of day traders or swing traders that trade penny stocks that are typically your education, that's where it's going to be your comfort area.

Deciding where is it that you want to spend more education is vital. The critical thing is, where do you want to progress.

If you're still in the learning and growth stage, you need to define this and then eliminate those areas. Because now all of a sudden, you need to make your profile based on those areas.

A Real-life Example of Making Profile

Let's say you want to trade high dollar stocks because that's where big money is. That means you want to focus based on technicals, and you want to be a swing trader to a longer-term investor. Or potentially even do options on these high dollar stocks.

Then obviously you need to focus more insights, energy, and education into options trading by the technicals in the high dollar stocks.

That's what you need to focus on rather than wasting your time on something else. Something like day trading the penny stocks or hanging out and following the people that are trading the penny stocks.

Penny Stocks Scenario:

If you're looking to trade the penny stocks if that's where you want to get to then, you need to spend more time focusing on the low dollar stocks.

You need to focus on the cheaper stocks for day trading. Penny stocks move for a shorter period. And in that case, that should be your focus in education.

How to Manage your Trades?

Everybody has a different management perspective or the way that they like to manage their account. It's the same concept when you're managing a bank account differently than other people.

Some people will spend their money on cameras. Other people will spend money on their computers. You might spend money on your car. Whatever your priority is that's where people put their money.

If you're more interested in camera gear and computer gear, you don't care about cars. For me, that's typically the way things work out. I don't care about my car that much because I don't drive that much.

However, I'll spend more money on my computer and camera gear. I value those things a lot more and use them day to day.

In either case, where is it that you spend more money, more energy and more resources, that's what you're looking at — the same thing here in managing your trades.

The management is going to be different based on:

  • your style
  • your comfort area
  • your education

This is what I tell people who are trading shares or contracts to contracts of options or a hundred shares if they have a stock that goes up a couple of bucks you want to take about half of your position off.

As you get more proficient, you could do a third or a quarter off in the strength. And then let the rest ride. If you're doing option contracts the same thing, you could take one deal off into strength and then let the remaining option contract ride. This all depends on you, but your management style might be different.

You might be the person that on pullbacks you buy the stock. Other people might be the person that buys on breakouts. You could be a combination of both. You could be much more flexible and do a mix on those things.

But it comes down to your style of managing the trades. You might manage trades differently than somebody else. Building a profile around some of these things is your goal and key. Figuring out what's your risk level.

Figuring out what's your style and figuring out your comfort area. What do you like to trade? What about your education? Are you more focused on penny stocks, or do you want to get into more options?

Then that's where you need to focus on — and then managing. How do you manage your portfolio? Do you manage it by buying on the dips? Do you manage based on looking for extreme events, drops, or volatility?

Are you managing it based on the money the finances that you have on the table - selling half a third a quarter?

All those things come into play that creates a unique personal profile for you as a trader.

Choices That You Need to Make

It's like choosing a woman a mate or someone to spend the rest of your life with. You have choices. You have options, and you're looking for your match.

There are so many different types of people out there, and all you need to do is find one. You need to find one that works with you.

And in trading is the same thing. You only need to find one style, one strategy, one main thing, the way that you trade that works with you.

You are unique, and that's why you have to find something that matches with you, rather than trying one thing or another thing. I mean you're going to do that just like in dating. You'll probably date one or two or multiple people through time and history.

Figure out what is it that you're looking for. See how you match with one person or another. But in general, you're looking for someone that can match and relate to you.

With trading, that's what you're doing. You're trying to find a match that you can relate with. That is something you can do time and time again that. You can take advantage of the market opportunities that are given.

That means you put on that trade every single month. Or you put on a trade that you see every single week that matches your criteria. And that's what you're doing. You're finding your specialty. You're finding the specialty that works for you.

When it comes to trading, a lot of it is internal. You have to look inward to figure out what works for you. You have to be honest with yourself. That's one of the problems that many people have.

They're not honest with themselves about:

  • what style they are
  • how much risk tolerance they have
  • their education

We always want to think we're smarter than we are. When in fact we when we have very little education, that's where we need to be a bit more careful.

Instead, take things slower, and when you find your match, then that's the breakthrough. That's where you can create trade and make that trade. And look at that trade and make it work consistently.

Take a moment to look in the mirror and evaluate yourself. To figure out your risk profile and it's something that may take a little bit of time through experimentation. It's not easy to figure out what it is that you like and what you don't like.

Some of these things you can guide them into a certain way depending on where you focus your energy your education. And if you focus on improving.

Look at your risk tolerance, the things that you're attracted, and the style of trading. Take a look at the education that you currently have and the education that you also need to get to where it is that you want to get to.

Evaluating all these things, along with how you prefer to manage money is going to help you determine your trading profile. Then look at how you can modify your trading profile.

Final Word

You're looking to evolve and improve continually. If you're looking to do that, you need to know and understand the types of risks that you want to put on the table. You have to be aware of the types of trades that you like as well.

If you can do that, then you can consistently trade on a week to week, month to month, or a year to year basis, producing those same results. All that is possible only because you know and understand what works for you.

Author: Sasha Evdakov

Sasha is the creator of the Tradersfly and Rise2Learn. He focuses on high-level education speaking at events, writing books, and publishing video courses on business development, internet marketing, finance, and personal growth.

I'm Sasha, an educational entrepreneur and a stock trader. In addition to running my own online businesses, I also enjoy trading stocks and helping the individual investor understand the stock market. Let me share with you some techniques & concepts that I used over the last 10+ years to give you that edge in the market. Learn More

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