Market Overview

Sheep, Pigs, Cheetahs and Lions: The Four Personalities of Traders (Part 4 of 5)


In part two of our five part series on animal trading personalities, we learned sheep are controlled by fear and they don’t focus.

In part three we learned about pigs and how they like jumping into any kind of trade. They’ll jump in early or late. They can’t wait to profit but they don’t want to learn anything. They just want to be spoon fed and given the slop; they just want to go and make money.
The third personality, the cheetah, can read the charts and trade pretty decently. Usually, cheetahs are actually pretty good traders. They may be able to go in and trade the charts and quickly pick it all up.

They may be able to trade with style and be right quite often. They trade well but they couldn't tell you how to do it. You know you’re a cheetah if you’re trading with a fair amount of success and you have good instinctive style, but you can’t explain to anyone how you are doing it. If someone asks you, your response is that you don’t know; you’re just doing it. That is a good sign of a cheetah.

If you can’t tell someone how to do what you’re doing when you’re trading, how are you going to know when you’re doing something wrong, and how can you build your future around that? How can you consistently do each step of your trading successfully, overtime, if you can’t even define it?

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A cheetah will have a good grasp on systems and strategies, even get the risk management down. Here is the key characteristic of a cheetah: They go incredibly fast, (they’re the fastest land animal,) but they burn out really quick.

They can go 70 miles an hour in about four seconds, but they cannot run the full speed for more than 100 yards. They go full speed for about the length of a football field but, then they are done. They overheat.
Cheetahs don’t have long term goals. Sometimes their goal is just to quit their job, and they may think about the next twelve months. Trading is more of a marathon, rather than a sprint. It’s about where are you going to be in twelve months and where are you going to be in twelve years. You need to understand that concept.

Cheetahs will jump to multiple strategies, not because each of the last strategies they used didn't work, but because they want to find a trade now. They’re bored. They want to be where the action is. If they can’t find a trade, they get antsy. So they’ll pull up another chart and look, then another chart and look, and another chart and another continuously. This isn’t about following four or even six markets fairly diligently. What they’ll do is open a chart and if nothing is happening, they close it and open another chart, and they keep going until they see something happening.

If the trade takes too long to set up, they’ll open another chart and start watching. So now they’re watching two markets without paying attention to first market. They’ll see a trade on Russell, but then they get bored so they go over to Crude Oil. Then they miss out on two winning trades on the Russell. They keep going back and forth between various markets.

They’re very fast jumping around so there is no consistency to their trading. They’ll catch every other trade. Soon they’re missing winning trades because they’re going too fast and forcing trades. They’re not following through on their system. This, ultimately, will mess with their probability over time. They need to slow down, stop trying to force trades and wait for the right trade.

It doesn't mean you can’t follow eight markets. If you’re trading the spike striker system, you can monitor eight markets. You can take all the trades, but you need to take them only if they line up. You might be following too many markets and you’re going to miss on the winning trades. Basically, cheetahs have a need for action.
They can almost be called “A jack of all trades but master of none”, but not because they can’t master it. It’s that they don’t have the patience to let it work out. They will learn ten strategies at once without mastering a single one.

They actually have some ability to trade. They will trade live and do half way decent, but they don’t master any one of their strategies. They keep piling more systems on. They need to learn and master one strategy at a time.

A system can be mastered quickly. They don’t need to spend forever on one system. Once they've mastered it, they can add another system in and master it. Eventually, they’ll have different strategies for different market conditions. They can have an oscillating strategy, some trending strategies, and some reversal strategies. It is important to master them before another is added on.

Don’t be a sheep and spend six months demo-ing and mastering one system before going live. Master one and demo another one at the same time. Get going live and then demo another one, and so on.
If a cheetah has a loss, they will tinker. They may add indicators to their charts when they have a loss, but it won’t be like a sheep with a thousand indicators on their chart. When they have a loss, they react and their reaction is to change their system. It’s not responsiveness, but reaction.

They end up tinkering so much, they break the system. What do you think they turn into after they've tinkered so much with the system that is now broken and they’re losing? They turn into a sheep. Their reaction, with all the losses, is being afraid to trade. Now they’ll tinker and work on one thing and they may end up tinkering for six months or more and still not trade live.

They’ll back test and change rules, back test and change rules. A few days of losing can turn a cheetah into a sheep real quick. No system is perfect. Put money management and probability together, and move.
The cheetah may or may not stop when they hit their profit goal for the day. It’s really less about the profit and more about the action. They love the thrill of trading- they’re having fun! Don’t be a trade junkie. That’s a cheetah trait. If you’re up 7% or 8%, take your profit and get out, go home, be done for the day.

Take the rest of the day and be with your family or friends. Isn't that why you wanted to trade in the first place? Don’t let the urges get you jumping in and forcing trades. Wait for the setup and when you get it, execute without hesitation. So what do you want to be? You don’t want to be a Cheetah burning out, jumping from market to market, ending up losing and then always tinkering; finally, ending up as a sheep. Then, you’re not placing any trades because you’re afraid. You’re run by fear, so that you hesitate on every trade.

You’re getting in too late, or jumping out too early, ruining your risk reward model, never making profits and losing. Just endlessly tinkering. You don’t want to be a pig where you’ll try anything out and follow anybody. You just want to be spoon fed, where you have no security in the future and you don’t understand why anything works.

The pig is the eternal optimist that has to fund his account repeatedly. What you want to be is the lion, which we will cover in the fifth article of this five part series on the four trading personalities.
If you want to learn more about the four personalities of a trader, 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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