So, what’s your trading personality? Maybe that seems like a weird question, but trading is an activity that needs thoughtful decisions and actions to build the best strategy for you as a trader.
It might be hard to find which style of trading is right for you without knowing your trading personality type first. The good news is that you don’t have to make your personality fit your trading strategy, it is better to be honest with yourself about what fits best for you. Keep reading to learn more.
What is a Trader Personality?
A trader personality is essentially a person’s psychology on trading. Since trading is an art form, the best results are generally seen on traders who are emotionally stable. Trading takes patience, self-control, and discipline; traits which are all directly tied to one’s psychology on trading.
A person will generally have a clear vision of their goals as well as their good and bad performances. A trader personality is the mix of characteristics that make up a person’s psychology on trading. It can be positive or negative towards a person’s abilities in trading, and its effects can either help or harm a trader.
Discovering Your Trader Personality
There are many different types of trader personalities as there are people with different traits and skill sets. Some examples include those who go for more aggressive types of trading as well as those who choose to go for more conservative types of trading. Some of the most common trader personalities include:
The Aggressive Spender: This type of person is more for active trading. They prefer to make decisions quickly without getting too attached to their investments, which can lead them to more risks. However, they also tend to be very good at following trends and making the right moves quickly. As a result, they are able to make more profits in a shorter amount of time.
Best Type of Trading For The Aggressive Spender: Day Trading
The Passive Spender: This type of person is more for passive trading. They prefer to do their research thoroughly before making any decisions. However, because of this focus on complete study, they tend to lose out on timing opportunities that the aggressive types are able to catch. As a result, they tend to make less profits, but the profits that they do make are more stable and come in at a steady pace.
Best Type of Trading For The Passive Spender: Swing Trading
The Meticulous Investor:This type of person prefers to avoid trading all together. They have very strong research skills due to their focus on studying overall trends before coming up with an investment plan. However, because of their focus on research, they tend to lose the opportunities for timing. As a result, there is more risk in their investments and their profits are generally less than other types of trader personalities, especially in the short-term.
Best Type of Trading For The Meticulous Investor: Position Trading
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Trader Personality For Different Types Of Trading
Scalping Trader Personality
A scalper is a trader who makes quick and short term trades as opposed to holding onto their trades for longer periods of time. Because they are not planning on holding onto their trades for particularly long, they have a different type of mentality from those with the goal of swing or position trading. Scalpers plan less on averaging down with lower prices as a result of research and tend to take profits at a higher price point.
They also have a different risk management strategy from other types of traders, preferring to cut losses quickly in an attempt to keep their overall trading low-risk. Trading psychology for scalping traders is very important. This type of trader tends to be more impulsive and enjoy the feelings of adrenaline from making quick trades. Some common traits in a scalping trader personality include:
- A quicker sense of decision-making
- Ability to make faster decisions
- Non-attachment towards trends, price levels, and investments
- Ability to cut losses quickly
- A balance between research and impulsivity
Day Trader Personality
Day traders are those who look for good opportunities that occur throughout the day, with the majority of their trades occurring in one day. They tend to exit their trades quickly as a result of this specific type of mentality and prefer to sell as prices go up and buy as prices go down.
Day traders also tend to execute very well under pressure because of their fast-paced approach to trading. They are able to take quick decisions and make split second changes if needed, making them efficient in the market. This type of person is best for those who like working outside of an office setting since they spend most of their day out and about. Common traits in a day trader personality include:
- A quick decision-making process
- Non-attachment to their investments
- Ability to make high volume trades quickly
- Likes working outside of an office setting
Swing Trader Personality
Swing traders tend to hold onto their investments for a longer period of time in the hopes that prices will move upwards and net them a profit. They tend to sell once they’ve reached their desired return and then take their profits, which creates a set ‘pip target’ for them over the course of the trading period.
This type of trader is very common amongst institutional traders because it allows for more volume and a steadier approach to trading. They tend to prefer the more steady approach because it helps them to reduce volatility and be less impulsive with their trades. Common traits in a swing trader personality include:
- A desire for a steady pace of growth
- Less of an impulse-driven mentality
- Ability to withstand high amounts of stress
- A plan for their trading
Position Trader Personality
Position traders are those who focus on the long-term aspect of their trading, holding onto their investments for at least several months to years at a time. Instead of focusing on daily fluctuations in prices, position traders look at trends and overall patterns to determine when they should buy or sell.
This type of trading is best for those who like to plan and prefer a steady pace of growth. It can be difficult to make daily trades as a position trader, so those who tend to prefer not making trades every day would be better off with this mentality. Common traits in a position trader personality include:
- An ability to withstand high amounts of stress
- Likes to plan out their trading
- Non-impulsive lifestyle
- Wants a steady pace of growth
- Not focused on daily fluctuations in prices or small returns
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How To Find Out Your Trader Personality
There are different ways to find out your own personality in trading, but the most common way is through a trading journal. A trading journal contains details of various trades that you have made, and this means keeping track of your wins as well as your losses – not only will this give you a clear vision on how much money you have made or lost, it will also show a detailed account of your current trader personality.
Here are some questions to guide you through your trading journal:
- What is your entry point?
- Your exit point?
- Did you make or lose money on this trade? How much?
- Was it a short-term or long-term trade for you? Why did you choose the time scale that you chose? What was your primary motivation behind the trade?
- How did you feel after this trade? What were your feelings throughout the trading period – positive or negative, stressed or relaxed?
- What changes have occurred in your life since you began trading? Did it affect how you took your trades or the frequency around which you made them?
If you are unsure of any of these or have any other questions, consider taking a course in trading to find out more about your trader personality. This will guide you in the right direction and help you to improve on what you want to work on rather than just guessing where the problem lies within yourself.
By investing into your own development as a trader, not only will you learn more about your personality traits, but you will also use the knowledge that you have gained to become a better trader.
Looking To Develop Your Trading Personality With a Trading Psychologist?
On our Global Trader Programme, you will learn how to use various technical indicators and build a trade plan, as well as work with a trading psychologist to ensure you’re trading with an attitude that matches your trading personality.
Our funded trader programmes offer an immersive and structured vocational training, provided to those looking to develop their career as a funded proprietary trader. Alternatively, discover which is right for you today by getting in touch.