I recently wrote several articles for TraderPlanet about how brain type affects one’s attitudes, mood and behavior when trading and investing. Tendencies toward impulsivity, anxiety and even addiction may be the result of chronic under- or over-active brain states. Additionally, closed-mindedness concerning market-related topics also tends to be mediated by one’s brain state.
Brain types, however, are not the same as one’s “personality” and personality has a substantial influence on investor/trader behavior, as well. One often hears the advice to “trade according to one’s personality,” but there are few models for defining personality in terms that are truly useful in the financial markets.
I’ve learned from over a dozen years as a coach to top traders that traders can be “profiled.” In fact, a relatively small number of “Trader Types” encompasses just about all the personality variations, if one allows for hybrids.
Over the next 5 weeks I’ll present each of the Five Trader Personality Types and at the end of the series you can take a free self-test to determine your type. The acronym is AWARE* and…
A is for ‘Agrarian’
Farmers were the first traders and they still dominate the futures market in Chicago. Centuries before the CME was built, however, Japanese candlesticks were developed by Asian rice traders. In essence, financial markets arose as a way for Agrarians to offset risk and transfer it to others. Specifically, farmers sell their crops forward in order to guarantee a predictable price once harvest time arrives. That should tell you a lot about Agrarians as traders.
Indeed, Agrarians are hard-working, independent individuals who take a careful, consistent and conservative approach to life and to trading/investing. They like things to be orderly and predictable.
Those with the Agrarian temperament tend to take a big picture perspective on market behavior and pay less attention to day to day price fluctuations. Therefore, they are natural swing traders and position traders.
Agrarians are deliberate; they take calculated risks and don’t make up strategies or tactics on the fly. They do not change their methods or trading instruments very often. They value loyalty and tend to be loyal to one or two markets. Agrarians know their market of choice extremely well and seek to take advantage of its repeating patterns and cycles. Their goal is to find a clear, reliable method that they can apply over and over.
Psychological Challenges for Agrarians
Farmers plow their fields in orderly rows. Agrarians like things to line up. The natural variability of markets can seriously frustrate Agrarians if they cannot find a simple pattern to exploit. Trading a timeframe that is too fast (daytrading) is also a common mistake.
*The AWARE model is copyright. Daytradingpsychology.com
[Editor’s note: check back each Wednesday for the next installment of this series.]
