Here’s a fun little exercise for you: If you had to choose an avatar that represents who you are as a trader—your trading personality, if you will—what would it be? To answer, think about your style, your manner, and your tendencies as a trader, and choose an avatar that most closely captures that essence. So, what is it?
In a perfect world, mine would be a fighter pilot-type, cool and confident, with ice water running through his veins! (Plus, he would have cool stories for cocktail parties, and the ladies would love him!) But more seriously, I like to think about this exercise and honestly assess my own trading personality from time to time. It’s important stuff, and I’ll tell you why.
To become the best trader you can be, you have to know yourself and your trading personality inside and out. That’s because some elements of trading may require us to inhibit natural tendencies, or perhaps even amplify them. So, if you don’t quite know what you’re made of to begin with, it’s that much harder to know how to go forward in pursuit of your dreams.
That’s the point of this discovery process, to be honest in determining your trading personality, be keenly aware of the way it may help and hinder performance, and, overall, become more knowledgeable, not only about the markets, but about what it takes for each one of us to successfully trade them.
Going back to your chosen avatar, what does it say about you and your trading personality? Maybe you’re a ninja, silently seeking out opportunities in the markets. Maybe you’re a chameleon, fast and highly adaptive depending on your surroundings. Or perhaps you’re a greenhorn, just eager to get your hands dirty and learn the ropes as you go. Unless you’re a ticking time bomb or something, it’s all fine!
It’s good to recognize who you are and how you trade. That’s your baseline trading personality. Maybe right now it isn’t exactly what you aspire to be once your trading career is all said and done, but it’s who you are now. Be very cognizant of it at all times, and perhaps most importantly, don’t fight it!
When planning or executing trades, make sure they are the kind that fit your trading personality, not ones that make you stray from your knowledge base and comfort zone. When studying new trading tools and set-ups, make sure they complement your trading personality, not force you to go against it. And, especially when tracking your results in your trade journal, pay attention to when and how you’re most successful as a trader, and don’t be surprised if it’s when trading the same “bread and butter” set-ups and/or market conditions that best fit your unique trading personality!
See also: How to Profit More by Doing Less
On the other hand, you also want to identify whether you have any “evil” twins, or perhaps an alter ego or two mixed in with your regular trading personality. All of us have our own unique flaws, after all, and bad habits and tendencies are just part of the game. For traders, these are the characteristics we work hard to suppress, because they stand in the way of consistent, profitable trading.
Here are a few common alter egos and why traders should do everything they can to keep them in check:
The “Bull in a China Shop” – You get on a hot streak, and all of a sudden, you feel like you can just start overpowering the market, taking on everything in sight. Next thing you know, you’re overtrading, taking undue risk, and trading sub-par set-ups because your adrenaline is doing the talking, not the cool and calculating voice inside of you that was the reason for your success in the first place.
The “Tazmanian Devil” – Hastily bouncing from one set-up to another with little rhyme or reason as to why, you’re out of control and way out of sorts. It’s fast and decisive, but not in a good way, because there’s minimal planning, very little attention to detail (like risk), and no pre- and post-trade analysis.
The “Fat Cat” – Money and greed becomes the name of the game, and trades are taken not because of the merits behind the set-up(s), or according to your rules, but because of how much money stands to be made if it works out. You may get lucky sometimes, but in the long run, a steady dose of discipline would work much better.
See related: Learn How Not to Trade, Too
In essence, trading the markets is a solitary game against an invisible opponent. And while you have to know the markets and set-ups you trade inside and out, it helps to know yourself equally well, because as we all know, sometimes trading becomes an intense and personal battle.
You have to know who you are and what you’re made of—the good and the bad—and that’s why it pays to know your trading personality. Like a fingerprint, everyone’s is different, and that’s fine, because there is no one “right” way to trade the markets. That means you can probably be successful with the trading personality you have right now, but the point is this: Know your own unique tendencies and account for any and all instances where that could interfere with the exact execution of your trading strategy.