Last week I discussed how one’s personality has a substantial influence on investor/trader behavior. In fact, one often hears the advice to “trade according to one’s personality,” but most models used by psychologists for defining personality are designed for the corporate world, to help management identify leaders and team players.
These standard models provide very little useful information to those who are active in the financial markets, because leadership skills and the ability to play well with others won’t help you make money as a trader or investor.
In my work with top traders I’ve developed a model consisting of 5 Trader “Types” that sheds light on all the important personality variations, if one allows for hybrids.
This is part two of a Five-Part series on the Five Trader Personality Types. At the end of the series you will be able to take a free self-test to determine your type. The acronym I’ve developed is AWARE.* Last week we discussed the Agrarian (Farmer) and this week we are on to the next letter…
W Is For ‘Warrior’
Warriors regard the market as a battleground between the bulls and bears and between themselves and other traders. Warriors consider trading to be an intense competition that requires mental toughness and aggression in order to succeed. Their main focus is determining who is in control, which side is currently winning the battle, and they try to join the winning team.
Warriors take a dominant role in most life situations, including trading. Of course, they know they cannot control the market, but they do their level best to not let the market control them. When markets move against a Warrior, he/she does not give up easily, if at all. They have an incredibly high tolerance for discomfort and pain. Struggle, per se, is not a negative for these folks; they fully enjoy a good fight.
Warrior traders like to dominate. Since they can’t dominate the market, per se, they improvise tactics and strategies in order to exploit the weakness and mistakes of others. They are incredibly tenacious (and some actually resemble pit bulls), they don’t micro-manage their trades and therefore they rarely get shaken out of a good trade. The Chicago area is the breeding ground for the Warrior approach to trading.
Psychological Challenges For Warriors
Warriors have great difficulty admitting they are wrong about anything. Therefore, they tend to double down on losers and have trouble keeping losses small. If they do take a loss, they tend to also want to take some revenge, which is why Warrior traders tend to blow up trading accounts over and over. If they survive past the age of 50 or so, they become less oppositional and more rational.
*The AWARE model is copyright by Dr. Kenneth Reid. All rights reserved.
Daytradingpsychology.com
[Editor’s note: check back each Wednesday for the next installment of this series.]
