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  1. Beginner
    Early Stages for Beginners
    8 Topics
  2. Forex Terminology
    11 Topics
  3. Margin & Leverage
    2 Topics
  4. Personal Psychology Questions
    2 Topics
  5. Psychology for Beginners
    7 Topics
  6. Intermediate
    Identifying Scams
    2 Topics
  7. Brokers for Beginners
    5 Topics
  8. Technical Analysis
    13 Topics
  9. Market Structure
    5 Topics
  10. Completion
    Risk Management for Beginners
    8 Topics
  11. Fundamental Analysis
    9 Topics
  12. Advanced
    Using Indicators
    6 Topics
  13. Technical Analysis (Part 2)
    8 Topics

Two Types of Traders

Below I’ll give an example of two different types of traders we all will run into throughout our trading journey. Let’s take a look at Disciplined Diane and Risky Roger.

Disciplined Diane likes to look for trades with a 1:3 risk to reward ratio. Following the rules she has created in her trading plan, she allows herself to risk no more than 3% of her account. She doesn’t rush into any trades and focuses on quality setups over quantity. Currently, Disciplined Diane’s account is $5,000 USD. Since DD is only willing to risk 3% of her account and doesn’t want to lose more than 30 pips, she will be using a .50 lot size. This week, she has four setups. Each one, she is looking to gain 90 pips while still having that 30 pip stop loss. If her trade hits her stop loss, she will be losing $150 (3%). If it hits her take profit, Disciplined Diane will grow her account by 9%.

The chart below is a look back at Disciplined Diane’s account for the week.

Disciplined Diane_v3

Disciplined Diane didn’t venture off – she stuck to her rules. When she lost those two trades, she continued to follow her trading plan. She has a rule set for herself to take a break from the charts after a loss. That allowed her to clear her head and patiently await the next good quality trade. No revenge trading, staying disciplined, and using proper risk management made this a profitable week for her. Disciplined Diane was able to grow her account by 12% this week! That is amazing.

Risky Roger on the other hand has an account balance of $5,000. USD. Unlike Disciplined Diane, he has no rules. He’s gotten a little cocky since growing his account from $1,000 to $5,000. Risky Roger’s first trade of the week gained him a profit of $1000. USD. He used a 2.00 lot size with a risk to reward ratio of 1:1, risking 20% of his account. (2.00 lot size x 50 pips = -$1,000 Stop Loss on a $5,000 balance).

Risky Roger risked 50 pips to gain 50 pips and he won! He’s feeling confident so he does the same for trade number 2. WOW! Risky Roger is killing it! He has made a profit of $2,000 so far. What will he do with this next trade? They don’t call him Risky Roger for nothing. Well, this time he is going all out! He’s made so much already, he wants to up his lot size. He is now using a 4.00 lot size with a 1:1 risk-reward ratio, risking about 28% of his account. He still has the same stop loss and profit target. This trade though hit his stop loss! He lost -$2000 so he’s at break-even. Risky Roger has already been showing off his profits on Instagram and wants his $2,000 back. He sees a trade with a 100 pip potential gain so what does he do? He sets his stop loss for 100 pips. Placing the trade with another 4.00, he is looking to have his account balance at $9,000. After a few hours….BAM! STOP LOSS HIT!

Below is an example of Risky Roger’s week.

Risky Ricky_v3

Risky Roger has now returned back to $1000. He grew it from $1,000 to $5,000, started bragging and feeling overconfident, made a couple of trades, and now he’s back to $1,000. It took him weeks to grow it and in less than a week, he’s back to square one. He lacked discipline and had no system. On top of that, he allowed greed to play a huge role in his losses. Disciplined Diane grew her account by 12% while Risky Roger was gambling and got nowhere

Would you rather be more like Risky Roger or Disciplined Diane?