Risk Trading vs Risk Averse Trading and pull Back Trading

My good friend RT who is turning upto be an excellent FX Trader in the country is a great source of encouragement to those who'd want to learn from him. He imparts his knowledge free and interested traders can benefit immensely. He is always telling us that there are 2 types of  Traders, and they are Risk taking Traders vs Risk Averse Traders.

If you just search the web for Risk taking Traders vs Risk Averse Traders you will not come up with any material regarding Traders being classed into these 2 categories. Instead you will see many articles covering Risk and Risk Averse. This made me share some insights about them as I believe it is very important for traders.

Risk is something that leads you to danger, or expose your self to disaster, Loss or Damage. On the other hand the word Averse means having a strong dislike of or opposition to something.

When it comes to trading the Danger and the Disaster you carry in taking a risk is huge upto loosing the price you paid or the amount you paid. It becomes even more dangerous when you borrow and buy. So the Risk Trader must understand the reality of Risk Taking to take a risk in the 1st place.

On the other hand Risk Averse means totally rejecting the indulgence of Risk.

Therefore Risk and Risk Averse are 2 extremes. As such it is important to understand the way we get involved with Risk and being Risk averse as Traders.

Most of the Traders in Sri Lanka or Outside are TOTAL RISK TAKERS(TRT). These total risk takers do not have a clue as to why they are taking the Risk. They tend to be highly confident that the trade will succeed. They only think that the stock will go up even if they fall. They do not know or believe of an exit plan.

Apart from these TRT's we have come to notice that there is a selected crowd of PLANNED RISK TAKERS(PRT). They are more matured than the 1st lot, but they are not as big a crowd than the TRTs. They take the trade the moment their trading strategy is triggered. As they stick to a plan they know the BUY,SELL and STOP Rules.

The next crowd is called the RISK AVERSE TAKERS(RATs). They differ from the PRKs only to the extent of waiting for the price to hit an entry target, but wait for it to Pull back before it extends the trend. RATs enter into the position only when they see that the trend is in force and try to buy at a price lower than the high of the present trend.

The above chart shows the difference of Risk Takers vs Risk Averse Traders. Pull Back can be monitored by trend lines and fib retracement levels and many more indicators and Oscillators.

Another important aspect of Trading is knowing the 1st impulse, which I intend covering later.