TRADING PSYCHOLOGY
Full Mental (Trading) JacketHow Fit Are You For Trading?
by Ned Gandevani, Ph.D.
Reach your full potential as a trader by understanding your psychological makeup.Trading psychology plays an instrumental role in successful trading. Traders who are successful realize they are not trading the markets but rather their own psychology. But what does trading psychology really refer to? How do you know if you have the proper psychological profile to be a trader? What style of trading suits you best? What specific type of trading vehicle would best fit your personality?
The trading personality test in the sidebar on page 47 will help you identify your trading personality profile (TPP). This test can be used to identify your strengths and weaknesses with regard to trading. This information will then help you to develop specific strategies for optimizing your trading. To break down various aspects of your personality, however, the five-factor model is useful.
THE FIVE-FACTOR MODEL
The five-factor model (FFM) (or "Big Five") is a handy tool for breaking down and examining different aspects of the personality. It has its roots in the works of the late 19th-century English scientist Sir Francis Galton, who recognized that words and language enable us to discern the most significant differences among people in their interactions. For the last 70 years, this model has been used in numerous settings to understand and evaluate personality traits.
The FFM uses a classification system based on language. It identifies five domains of the personality: openness, conscientiousness, extroversion, agreeableness, and neuroticism (OCEAN). The domains' scores range from extremely high to extremely low, which makes them more practical and realistic for our purposes than specific personality types. Each of the domains is divided into three general levels: low, mid-range, and high.
...Continued in the June 2003 issue of Technical Analysis of STOCKS & COMMODITIES
Excerpted from an article originally published in the June 2003 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 2003, Technical Analysis, Inc.
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