Market Overview

Sheep, Pigs, Cheetahs and Lions: The Four Personalities of Traders, Part 1


Have you ever thought of yourself as an animal?

You were relating to the animal because you saw yourself as taking on those characteristics of a certain beast. There are four very defined animal personalities that we can all take on as traders. To self-analyze yourself and identify with that animalistic personality, is one of the most important things you can do to improve your trading, crazy as it sounds.

There are many things we can do, and have done, that can hurt our trading. Here is a short list: Impatience, lack of proper education, risk or profit management, trading live too soon, poor systems or strategies, jumping around between systems and strategies without mastering anything, inconsistency, not following your rules, not taking every trade of your system so you break your probabilities, trying to do everything, looking at too many instruments so you can’t keep up, not having any social interaction, thinking you have it, you know it all and not improving.

It’s essential to always improve. You never want to stop improving as a trader. You don’t just get there and you’re done. Be open to traders helping you by considering their suggestions. As markets change, you need to learn better ways to do things. With every additional year of experience, you’re going to do things differently than when you started out.

Trying to find that one best trade that always wins, just understanding the system ABCs, but not the chart or market 123s, isn’t going to bring you success. There is much more to trading than just wanting the rules so you can just trade and make money. If you want to take advantage of it, you have to dive into it. Some of the things that will hold you back are not knowing when to stop for the day and not having proper risk and profit management.

Or, you are not willing to take a loss and then taking a bigger loss because of your unwillingness. You might let greed take over and then not taking your profits. Then, a profitable trade turns into a losing trade. Doing something wrong and you get rewarded with a win, so you repeat it over and over until all of a sudden, it doesn't work and you don’t know what’s broken, but you've lost a lot. There are definite trading mentalities, each one having their own strengths and weaknesses.

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The media describes trading as a contest between the bulls and the bears. You can hop on MSNBC or another news channel, and hear the reporters saying the bulls are strong today and the bears are down.

You feel like this is your battle; that you’re battling bulls and bears. Well, you’re really not. The real battle is you-- you’re battling you. One of the top things to learn as a trader is that self-analysis is just as important as technical analysis.

You can give someone a perfect system and yet, a trader’s biggest challenge is often not following even their own rules, being too afraid to trade, or trading too much money. The real battle is not being patient for the right trade. It’s hard enough to come up with a good working system, yet, the biggest battle, even once you have a system, is working the system, following the rules and being patient for the right entry. Even if you have the money management down, you still have to follow your plan.

People think a robot is the answer by trying to remove themselves from the equation. They just want to be told how to auto trade it. They don’t want to do the self-analysis. The self-discipline part is the battle. It’s not with bulls and bears. The battle is inside you. The battle is with you and some traders write this off thinking, “Eh, whatever.” Understanding this will help you more in trading than any system will. Through self-analysis, you identify where your mistakes are.

It’s one thing if it’s a system that has mistakes, but you can’t tell if the system has mistakes, if you don’t first follow it correctly. How can you get a good system down if you won’t follow it?

As a trader and as you develop, mentality, risk management, system strategy, and education, is all built into your personality. There are four personalities that are similar to the sheep, the pig, the cheetah and the lion. We all take them on as we go through our trading stages. The first one sheep will be discussed in our second of this five part series.

A trader needs to know how to respond to the market and they need to be humble. The best definition of a humble person is somebody who doesn't have an overestimation of themselves and they don’t have an underestimation of themselves. They have an honest estimation of themselves. Traders need to have an honest estimation of themselves. You need to know what you can and can’t control when you get into a trade. You control how much money you put at risk, and you control if you follow your system.

You don’t control the outcome of the trade. What you need to focus on is what you do control. You want to have a good system that has proved itself. However, if you are not following your rules, or are over risking or under risking, it doesn't matter how good the system is, you won’t be profitable. You want to respond to the market. You don’t simply want to react to the market.

The reaction is that knee jerk, off the cuff, emotional, unplanned trade, trying to recoup the loss, a bad decision, a double down, or an “I’m bored. I’m going to hit a button.” That’s a knee jerk reaction. You need to be responsive, calculated, planned and analytical, having proper education. You need to spend the time to learn. Doctors spend a lot of time learning how to do surgical procedures and you’re glad they do. You don’t want some guy who’s in the operating room thinking, “I’m just going to see if this works,” when they’re doing your brain surgery.
There are a lot of little things as you learn the four personalities that you can learn about yourself and improve, if you are able to step back and challenge yourself daily, or even after every trade. Step back and consider which one personality you were being. One of the biggest things this will help you do is to keep a 12 month mentality instead of a 12 day mentality.

If you are always thinking about needing money, that you have to do this now, then you most likely you won’t trade well. The market is good about taking away money from those who need it. When you come from need, you become very reaction oriented, and not responsive. When you’re not coming from a place of need, you can focus on your trading and trade well. You have a lot more control. The second of this five part series, we will learn about the sheep mentality and their characteristics.

To find out more about trading psychology, go to Apex Investing Institute offers free education, and free access to the Nadex Binary and Spread Scanner Analyzers. Member traders are invited to trade in the rooms, take advantage of trade signal services, have key indicators and access the Apex Forum. The forum content is updated daily and includes over 7000 members. In a supportive learning community of seasoned as well as up and coming traders, traders of all levels learn how to trade Nadex binaries and spreads in depth, as well as futures, Forex, stock and options, and gain an edge for successful trading overall.

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

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