Trading Psychology: What Sort Of Trader Are You?
One common piece of advice given to aspiring traders goes like this: match your method to your personality. But because most traders focus virtually 100% on the market it is unlikely that many could actually describe their trader personality.
In the everyday world, we get feedback about our interactions with others that gives us clues whether we need to change something about our attitudes or behavior in order to succeed at a higher level. But the feedback from Mr. Market is usually regarded as impersonal. Therefore, traders generally don’t learn much about themselves from their P&L.
In my experience, however, if you don’t know your trader personality and it’s natural strengths and weaknesses, it will operate on automatic and the weaknesses will assert themselves in more difficult market environments. This is because to cope with new challenges we tend to over-rely on our strengths while trying our best to ignore our weaknesses.
The trouble is, what we ignore comes in through the back door.
Paradoxically, the fastest way to self-improvement as a trader is to address one’s weaknesses head on and make the tough changes required to fix them. Inevitably, these changes will feel uncomfortable and difficult, otherwise you would have made them already.
The most effective way to move forward is to pick just one weakness and work to improve it for an entire week. Here’s the problem: you probably won’t be able to catch yourself making the mistake until after you’ve made it. However, if you can notice your urge to make the mistake before you actually make it, you are more than half way to fixing it.