Trading and personality

It is not hard to believe that trading is linked to a particular personality: most traders like living exciting, edgier lives. They enjoy their share of thrills, and have an appetite and need to excel. These characteristics are linked to individuals who are attracted to trading. Crucially, however, you would be fighting a losing battle if you thought that trading could satisfy these parts of your personality.

Successful traders actually tend to be attracted to the duller parts of trading. They are not thrilled with their winnings, nor do they despair over their losses. Every trade, every situation, calls for certain actions. These can either be liquidation, stop placements, or just waiting, but they are all pre-ordained.

Sure, there are chart readers, like yours truly, but even then, charts dictate the action needed. While we do not use mathematical equations to decide entries and exits, we do use charts. We do sit on positions when we would rather not, we do exit when we would rather not, but this is all pre-ordained as well. In short, our observations, our trained eye is our system.

Contrast this with emotional traders who go from ecstasy to despair on a weekly, daily or even hourly basis. One minute he thinks he has figured out the holy grail of systems for trading effectively, the next he realises that all his friends were right and that trading is a waste of time, comparable to gambling at a casino. He was attracted by the appeal of easy money and was sure he would get it.

Well, even the most successful traders will tell you, trading is NOT easy money. 50% of annual returns may sound too good to be true, but it is not without its share of the full range of human experience. For even the most seasoned, mechanical traders will also tell you that, deep down, they experience the same emotions as the novice. The trick is and always has been not to allow your emotions to affect your trades.

So, you can be wildly emotional on the inside. But you had better stick to your guns on the outside. Most weeks, most days, and most hours, you are not going to be very happy about your open positions.

Most trades will go against you at least once whilst they are open. And probably more than once, the unpredictable is always going to happen. The illogical will always have its moment, and yes, you are going to be wrong. The only smart thing to do about all of this is to learn from it. In fact, if you are not still learning new things from your trading, then there is no point in you continuing to do it.

Markets, like human beings, evolve. Evolution is the only thing you can bank on, and if you think you do not need to partake in it, then you will be consumed by it. To be successful at trading, you do not need to always be one step ahead of the evolving markets. However, you do need to be in time with them, and you need to accept their existence.

How to know your personality? There are different theories and tests on this subject. One of the most used and famous methods is the Myers-Briggs Type Indicator® (MBTI®), which you will see in detail in the next post.