IDENTIFYING MY TRADER TYPE

A question we get asked on the daily is this… “what type of trader should I be to maximize my profits?”

Probably something you’ve also asked yourself too because you’ve found this guide.

On the flip side of this, of the many times we’ve worked 1-1 with traders to answer this very question, 9/10 their trading worlds are turned upside down after a thorough strategy deconstruction, where they discover that the trader they want to be, is nothing like the trader they thought they originally were.

To explain this to you the right way, we first need to show you the factors that make up the bigger picture of identifying where your ideal trading strategy lies.

Buckle up kids, because this guide is going to be a rocky ride and a revelation for many of you..

Before you get started, you might want to check out some fo these other UTG resources

1. Beginner trading series
2. Common beginner trader mistakes
3. Stables coins (for selling out of BTC)

NOTE: This guide is a reference ONLY, take from it what you will and create your own frankenstrategy if you want to, but the single biggest tip we can give you is this… Find a strategy that works for YOU and master it.

Now with that out of the way you might be asking yourself why you need to identify the type of trader you are… couldn’t you just sit around and scalp the smaller time frames make 20-30 trades a day and retire in a month or two? (That’s what most new traders think from our experience anyway…)

Well sure you could.. but

• Do you currently have a day job?
• A family you need to care for?
• Are you mentally strong enough to watch skyscraper looking 1min candles you can’t mentally cope with while your PNL statement swings like a drawbridge in a hurricane?

That’s why it’s so vitally important to take a step back from what you THINK will work best for your lifestyle and ACTUALLY sit down and work out HOW you will fit trading AROUND your lifestyle.

Take a minute to digest that..

Trading shouldn’t be considered your primary source of income unless you want to make trading a full time job, but really, isn’t trading a full time job for another full time (trading) job just that? Another job?

In this guide we’ll be looking at four (4) of the most common trader types

1. The scalper (5min – 1hr time frame)
2. The swing trader (4hr – 1D)
3. Day Trader (1hr – 4hr)
4. The position Trader (1D, 1W, 1M)

1) The Scalper

The scalper will tend to only hold onto a trade for seconds or maybe minutes . The main objective is to use higher leveraged positions and catch small .5 – 2% movements, many times throughout the busiest part of the day for more volatile price action (this could be hourly/daily/weekly open or close for example.)

This means you’re going to be behind the screens a LOT and trading a load of positions. This type of trading is really only suitable for traders who have the time to sit there for hours a day and are quick to execute a trade with very little emotional bias. 

For this, you only need very basic tools, usually trend lines, support/resistance and the RSI will do the trick. It is also important to have reasonable targets in mind before placing the trades and the most important emotion to conquer is your GREED.

PROS

• Potentially quick gains with the right coins
• Only requires basic TA

CONS

• Creates a big mental battle for most traders with volitile swings
• Constant need for time in front of the computer
• Can create trader burnout

2) The Swing Trader (Our personal favourite)

Swing trading is for those people that like to hold on to trades for several days, or even weeks at a time. This trade type is great for people who work full time or have a lot of commitments, like children or a demanding lifestyle and don’t have the time to monitor trades throughout the day. 

We’re a little bias here, but this truly gives you trading freedom. The biggest time taken is to set up the trade in the right way, or as we like to say here at UTG “Let the trade come to you”, from there, you set stop losses once the trade is taken, set take profit levels and walk away.. It’s really that simple.

“give me six hours to chop down a tree and I will spend the first four sharpening the axe.”

– Abraham Lincoln

That’s it.. check the trade one or two times a day and if you get stopped out, you stuck to your guns and you can journal the trade to find out where you could have improved.

If your take profits levels are hit, move your stops up, walk away and enjoy the ride.

In doing this, you’ve just set yourself up for true trading and financial freedom by having the markets work for you while you sleep, without the stress and overwhelm that comes with having to sit in front of a screen all day like a scalper would.

Your money is working for you, you’re not working for your money. 

PROS

• Suitable for those with full-times or parent duties
• Far less time in front on the screen
• Removes the need to check tradingview 20 times a day
• Creates a stress-free trading environment (set and forget baby!)

CONS

• Difficult at first to get over the “I need to be in a trade 24/7 mentality
• Can be a hard time adjusting to not having to check tradingview 20 times a day
• Ahhh.. that’s about it 🙂 

3) The Day Trader

With Day trading you would normally chart first thing in the morning or the previous night to find entries and possible targets to reach towards the end of the day. Trades would generally be executed at the beginning of the day, and you would hold the trades to close at the end of trading day.

Some traders may choose to close positions overnight and if trading FX, would close their positions at the end of the daily trade when the markets close.  

PROS

• Less time in front of the screen than scalping
• More time to adjust your strategy and positions
• Less emotional stress
• Easier to stick to a structured trading schedule

CONS

• Not ideal for beginner traders
• Requires a solid, well thought out trading strategy.
• Can still effect family time/work time with trading requirements

4) The Position Trader

Position trading or long-term trading is for people who don’t have the time or desire to trade on a daily basis as generally, a position may last weeks, months or even years at a time (in extreme circumstances). This type of trading requires technical and fundamental analysis with a lot more emphasis on fundamentals when expecting price to push out of, or dump from a zone. 

The very basics will work here, such as supply and demand and Fibonacci extensions to ensure that the price is right for entry. However, if the market is driven by fundamentals you need to have a lot more patience and be willing to ride the ups and downs as price goes through swings and cycles.

This type of trading is more a form of mid to long term investing and does not require constant monitoring.

Would you like some trading strategies with that?

Of course you do! That’s what you’re here for, right?

Well fear not because there are loads of styles and strategies to trade within each type of trader category we’ve listed above. These strategies can be applied to most of the 4 main types of traders, although generally speaking some strategies suit a specific type of trader better, so cherry pick from this what you will and apply it to your own strat. 

There are loads of other strategies than the 4 we’ve listed above, but these are the more common styles, and you’ll likely come across combinations of these in your travel. 

Trading Strategies

• Trend Trading
• Breakout Trading
• Range Trading
• Momemtum Trading
• Reversal Trading
• Retracement Trading

1) Trend Trading

Trend trading is one of the more popular and common trading strategies because it doesn’t involve a great deal of trading skill and often yeilds the easier returns on a more macro scale, but what is it exactly? 

It involves identifying an upward or downward trend and choosing a trade entry or exit based on the position of the assets price within the trend and the trend’s relative strength. (In short, is the trend bullish or bearish)

You may have heard the phrase “The trend is your friend,” and it’s a handy phrase to remember because using nothing more than a few indicators, gives you a lot of power on gauging whether and assets price is headed up or long mid-long term.

(Short term trends can be identified for this too, but a “top down” approach works best with trend trading – IE starting at the 1D to confirm overall trend and confirming that on the smaller TF)

What indicators work for this type of trading?

• Moving average (UNICON)
• Steamroller 
• RSI (Stoch RSI or standard)
• Ichimoku (UNIMOKU)
• Volume

2) Breakout Trading

A breakout strategy is a method where traders will try to identify a trade entry point at a breakout from a previously defined trading range or pattern. If the price breaks higher from a confirmed resistance, you may buy with the expectation that the asset will continue to move higher to another level of resistance.

Vice versa if the price breaks a level of support within a range or pattern, you may sell with an aim to buy back at a lower price or simply short the asset if available. 

This method is used a lot for scalping shorter time frames but is still a strong strategy in any day trader and swing traders handbook.

What indicators work for this type of trading?

• Trend Lines
• Support / Resistance
• RSI
• Steamroller

3) Range Trading

Range trading is a simple and popular strategy based on the idea that prices can often hold within a steady and predictable range for a given period. This strategy works best on markets that are stable have volume and predictable economies, and aren’t often subject to surprise news.rS

This trading strategy is the number one when it comes to swing traders as it does not require constant monitoring and generally reaps the best risk to reward ratio.

What indicators work for this type of trading?

• RSI
• CCI (for spotting divergences)
• Support / Resistance

4) Momentum Trading

Momentum trading is very similar to trend trading, although generally looking for reversals or strengths of trends to take a position. For example, if a downtrend is losing momentum it could indicate a good time to take a position, and vice versa in an uptrend could indicate a time to sell or short the asset.

Commonly used for swing traders and position traders, although day traders will use this method on smaller time frames. 

What indicators work for this type of trading?

• RSI
• Steamroller
• CCI (for spotting divergences)
• MACD
• STOCH RSI
• Heiken ashi candles

5) Reversal Trading

Reversal trading is when traders look to anticipate a reversal in a trend with the aim to guarantee an ideal time to enter the market. This strategy is considered more difficult and risky as True reversals can be difficult to spot, but they’re also more rewarding if they are correctly predicted.

This type of trading suits day traders and swing traders it requires concentration and planning ahead of time and can sometimes be fairly quick trades to execute.

What indicators work for this type of trading?

• RSI
• CCI (for spotting divergences)
• MACD
• Steamroller
• Moving averages

6) Retracement Trading

Retracement strategies are based on the idea that price won’t move in perfectly straight lines between lows and highs, and usually make some sort of a pause, consolidation or short-term pullback, before returning to the trend. 

Generally, retracement traders will wait for that pull back and typically rely on Fibonacci percentages to judge their ideal position, with short-term targets to the previous structure or resistance, and then asses whether or not to sell and buy back on another retracement.

This strategy is often used by scalpers and day traders and generally requires a bit more attention than other strategy’s and can be used on smaller time frames.

What indicators work for this type of trading?

• RSI
• Trend Lines
• Support & Resistance
• Fibonacci