TRADING PSYCHOLOGY
Full Mental (Trading) Jacket
How 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.
Return to June 2003 Contents
