Return to Back Issue Archive or December Contents
There are many different styles used by individual traders, some proactive, some reactive. Either can work and either can fail. Here's why."One of the reasons why so few traders succeed has to do with whether their approach to trading is proactive or reactive. Which is a better approach? Do successful traders plan for and anticipate everything, or do they jump in without a plan, react to whatever happens and go with the flow? The answer may appear to be self-evident, but in fact, the answer is far more complex than you may realize."
"Pro" does not necessarily mean progressive and "re" does not necessarily mean regressive. Take, for example, the case of Randy and Jeff. Randy, who planned for every contingency, was certainly proactive in his approach to life. He was highly organized in everything he did, and he was cautious about leaping into something before he was prepared with information, backup systems and technical support. When Randy decided to become a trader, his approach was nearly the same as Bill's approach in setting up his business. They both anticipated, planned and spent money on developing their respective businesses. They both held off full-time trading in real time until they were ready to do so.Both proactive and reactive traders can be successful if they are willing to optimize their own approach to decision-making and problem-solving by doing what each strategy requires to succeed.
The big difference between Bill and Randy was that, armed with the same resources and information, Randy made all the wrong decisions. He read many of the same books as Bill, but found it difficult to home in on one type of trading. He interviewed many brokers but could not decide whether he wanted to go with a full-service broker or a discount broker. When he finally decided to become an options trader, he wasn't sure whether he wanted to trade long-term or short-term options. Five years have gone by, and Randy is still taking a proactive approach to trading, although he has never put real money on a trade. Instead, he uses planning, preparing and organizing as a means of avoiding having to make decisions, take action and deal with risk.
In order to find the right approach for you in trading, whether proactive or reactive, start by discovering your own strategy for completing tasks.