interbank market the Analyst, the Trader and the Risk Manager are divided into
three distinct roles.
The analyst is responsible for understanding the impact of fundamental data and the technical picture, with a goal of getting the direction correct.
The trader is responsible for implementing trades that are in alignment with the analyst's view, and for managing open positions using a combination of prudence and market knowledge. They will decide what levels they want to be in and out at.
The risk manager is responsible for making sure position sizes are in alignment with the objectives of the desk, that correlations are kept under control, and that the firm is not over-exposed going into high volatility news events.
This distinction between roles is critical
It is hard for the analyst to remain objective if she has a position on. Or when a trader makes up their own risk management rules it usually ends up in disaster.
This is a challenge for the new breed of retail trader whom needs to be part analyst, part trader and part risk manager, as well as having to be their own overall business manager - in the interbank market there is a floor manager who is there to make the different parties play nice (or to fire those that don't perform their role effectively), a luxury the retail trader does not have.
Segment your activities
To help deal with the challenge, you may find it useful to segment your activities along the lines of these three different roles.
Your analysis time should be kept separate from your trading time, and should allow for an objective assessment of the market, including the positions you have on as a trader. If you start trading at the same time as you analyse the markets, you are likely to get excited and place trades without properly stalking a low-risk entry point.
Your risk management plan should be developed well in advance of your trading time. The nice thing about risk management is that it is a solvable mathematical problem. It just takes time and thought to make sure your risk management rules are in alignment with your objectives.
You might find it helpful before you start placing trades to imagine that your risk manager has handed you your allocation (and notes on key events) - and that if you break these rules today, the floor manager will fire you.
When trading, you can forget about analysis - that should already be done. You should also know exactly how much you are trading. You are simply waiting for your entry conditions to appear, so you can implement the trade(s). You are then monitoring for changes in the market type, levels where the price could reverse, and for events that could change the outlook for the trade. You also conduct prudent risk management activities to protect profits made.
All team members are just as important as the others
While the trader may want to be the star, their goal is to book the profits for "the team".
Traders are a functional cog in a larger trading organization that requires each part to work in sync. This is true even if, in the case of the retail trader, that organization is only one person.