Continuing my series to determine what type of trader you are here is an article on trading styles.
I have a belief that trading strategies come down to two simple variations. Either:
a. A bounce off a line of support or resistance, or
b. A break of a line of support or resistance.
Some may say I’m being a tad simplistic but I offer no apology. It’s a valid definition and works very well for this exercise.
So the question is whch type of Trader are you? Someone who trades a bounce off support and resistance or someone who prefers to trade a breakout of a line of support and resistance?
Do you even know?
If you don’t then you now have a valid excuse to go back through your trades and determine:
a) which type of trade you have a preference for, and
b) which type of trade has been giving you results.
I warn you the two answers maybe different!
Personally I prefer bouncing or pivoting opportunties off a line of support or resistance. And I’m lucky that my results back that up.
Either strategy is valid, you just need to know what works for you.
January 27, 2010 at 1:25 pm
Good post – to be honest I have no idea what I am but like you say I am going to go back through my trades and see if I can identify the type of trades I take. Are there specific price indicators you favour i.e. inside bar, swing low, swing high, power pivot (these might be called something else for you). Once you have found a set up – do you look more closely into these types of price bars or are you purely trading what you see i.e a bounce or a break through – regardless of what the price bars are doing?
January 27, 2010 at 5:04 pm
Hi Allison,
Thanks for your comments and feedback. My strategy is simple – I am looking for a confluence of events. That’s it. (As an aside, it always disappoints people when I tell them my strategy. They’re expecting some sophisticated secret Holy Grail style of approach.)
So even though I prefer pivoting or bounce-off strats (I’m sure there are plenty more descriptions) I’m still looking for a confluence of events. If price is bouncing off a line of support or resistance that also happens to be a pivot or fib level (though I use these much less these days) and is demonstrating a reversal candle pattern whilst looking at being overbought or oversold on in indicator then I have my confluence of events that provides me with an edge. Though I should state that it’s merely an edge. The probs may have swing in my direction from 50-50 to 60-40 that’s all. It’s by no means a dead-cert. I just have to trade with solid money managment skills.
I hope this helps. Good luck with analysing your own results.