Trading Psychology: Finding Your Trading Personality

Many people have asked the question “Is there a certain type of personality for winning traders?” Ask a winning trader and he’ll most likely say, “No.”

There simply is no personality type that is better for trading than any other type. But among the things winning traders have in common, you will find that they have the ability to assess with total objectivity the effect their personality has on their trading.

They know that if you know your particular traits, you can develop a trading system that best fits your personality. This in turn increases your chances for trading success. In short, to become a better trader you need to find your trading personality.

As in many aspects about life, self-knowledge is the single most important determinant in trading success or failure. You can trade any product successfully, using any timeframe and methodology. Your success will hinge greatly on this: that you choose the trading timeframe that best fits your personality.

If you are the type who needs instant gratification, long-term trading will not suit you and you may find it more profitable to focus on making short-term punts using the technical charts. If you are the patient type willing to wait weeks at a time, you may be very comfortable doing long-term trading. Successful trading needs you to be in your comfort zone.

If you are not certain about the trading style that you’re most comfortable with, examine the record of your trading history over the most recent two-three months. Try to assess the types of trades that were apt to catch your attention. Look at your entry points; why do you think you bought into that particular share at the time? As you review the transactions, you are likely to find an underlying theme — a theme that ultimately is influenced by your personality.

Look at your record of gains and losses. Is there a revealing pattern? There must be one. There must be certain trading situations that give rise to the bulk of such gains or losses. Determine the trading styles that resulted in profits to you, and the ones that did not.

The next step should be obvious. Concentrate on doing better. Take the style that has given you good results and try improving it some more. Discard the trading style that does not work for you.

It is possible to transform yourself into a winning trader by becoming more finely attuned to your physical and psychological reactions to various trading setups. This way, your emotions will not be the basis of your reactions; rather, you learn to use your psyche to help map out your subsequent moves.

If you don’t do that, you might end up having your emotions controlling your trading moves. Don’t you think that by recognising how your personality reacts, you will learn to use your personality characteristics to develop trading patterns that make your trading activity more productive?