Trading and personality

It is not hard to believe that trading is linked to a particular personality: most traders like to live exciting, edgier lives. They enjoy their share of thrills, and have an appetite for excitement and a need to excel. These characteristics are linked to the 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 by their winnings, nor do they despair over their losses. Every trade, every situation, calls for certain actions. These can be liquidation, stop placement, 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, and we do exit when we would rather not, but this is all pre-ordained as well. In short, our observations and our trained eye are our system.

Contrast this with emotional traders, who go from ecstasy to despair on a weekly, daily or even hourly basis. One minute they think they have figured out the holy grail of trading systems, the next they realise that all their friends were right and that trading is a waste of time, comparable to gambling at a casino. They were attracted by the appeal of easy money and were sure they would get it.

Well, even the most successful traders will tell you that trading is not easy money. Annual returns of 50% may sound too good to be true, but they do not come without their share of the full range of human emotions. 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 take part in it, then you will be consumed by it. To be successful at trading, you do not need to be always one step ahead of the evolving markets. However, you do need to be in step with them, and you need to accept their existence.

How Can You Know Your Personality?

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