Do you know and understand your real trading personality?
No two traders are alike. Traders enter the markets with a wide variety of backgrounds, and come from all walks of life. Some are finance majors. Others are retired policemen, working mothers or students trading from their dorm rooms using free campus wi-fi. Each and every trader has a distinct, unique personality that governs their trading behavior.
So what kind of trader are you? You can find out your Investor Profile to help you identify your personality traits, and to help determine how those traits shape the way that you are most likely to trade. Basically, every trader falls into one of 16 trading personality types, based on the following grid:
The horizontal axis represents how much risk the trader is willing to take, while the vertical axis represents the emotional involvement of the trader. Each trader has primary and secondary personality types associated with their Investor Profile.
For Example, if you are an Intuitive/Methodical trader, you tend to be more emotionally involved in your trading with a higher risk tolerance. This can be both a good thing and a bad thing. Here’s an excerpt from our Investor Profile book on the Intuitive/Methodical trader:
“You have an easier time processing the variable nature of markets than most, although you tend to make decisions based on intuition and previous experience rather than on stone cold facts. You tend to leave yourself vulnerable in volatile market conditions as you often trust your intuition and are easily swayed by changing conditions.”
If you were graded as an Intuitive/Methodical trader, then this short synopsis just might ring true to you. Just as important as knowing your personality type, is to know your areas of strength and weakness. Specifically:
- How you see yourself
- Your basic desires and motivations
- Your behavior under pressure
- Possible need for improvement
- Ideas for better performance
Let’s take a look at the four major personality types:
The term “aggressive” may sound instinctively negative, but within the Investor Profile it simply means that the Trader’s emotions may cause early or impulsive entries and exits. This is a personality type that may be so keen to trade low-risk, that market changes may cause unnecessary precautionary action. As with ever Investor Profile, it is not necessarily a negative thing to be an aggressive investor. They possess several qualities that can actually be quite beneficial.
For example, aggressive investors are less paralyzed by inaction.
There are four Aggressive personality types:
Each one of these personality types behave differently, and the full description is disclosed when you take the Investor Profile Test.
The Intuitive Investor
This investor relies more on intuition than an analytical investor. An emotional reaction based on greed or fear will more likely cause the trader to take a high risk position. If this is your personality type, you can be tempted to take trades based on a “hunch” or perhaps because you don’t want to be bothered with the math of risk ratios. This trader is capable of making a lot of money, but also giving it back if the don’t learn to effectively manage their trading personality.
There are four Intuitive Personality Types:
The Analytical Investor
The most common problem with Analytical Investors is inaction. While a low-risk, low-emotion personality may seem ideal for many investing situations, this personality can over-analyze and never take any action. If this is your personality type, please remember that all of the education in the world doesn’t matter if you can’t push a button. Analytical investors may prefer trading Options Contracts in favor of other markets due to their ability to manage risk and set up complex, but virtually worry-free positions.
Here are the four personality subtypes for Analytical Investors:
The Methodical Investor
An investor who is willing to take more risk than others but who also tends to be emotionally unattached is methodical. They are methodical precisely because they will be more prone to trade placing trust in their method regardless of how they feel emotionally about the position.
As with every other Investor profile, the methodical personality has unique strengths that will help their investing profit potential as well as unique problems they need to learn to overcome.
The four Methodical Investor personality types are: