Successful forex traders belong to different backgrounds when it comes to their education and work. Thus, there is no specific formal education for becoming a successful forex trader. However, there are some particular skills, attributes, and attitudes that can prove to be really beneficial and lucrative in forex trading.
In trading, your emotions and personality type can make you suffer losses. A lot of traders focus on the methodology and market analysis, rather than focusing on themselves. The former is important but the latter too is of significance.
If you want to be successful in forex trading for years to come, then you need to be self-aware and know your trading personality or psychological type. This article will help you figure out what type of psychological trader you are so that you can succeed in forex trading.
Forex personalities 101
Trading psychology refers to the mindset of the trader while making trades in the financial markets. It can provide you a clearer picture of why you gained profits or suffered from losses. Innate characteristics of humans, such as emotions and biases, play a crucial role in trading psychology.
The trading personality type of a trader is important in them being successful in the forex industry. This is because our trader personality is what creates the problems for which we look solutions through other methods. However, we cannot get a solution to a trading issue if we find it with the same unconscious thinking that is responsible for creating the problem.
If you know your trading psychotype, you can decide your trading tactics accordingly as per your trading style. If you learn strategies that don’t suit your trading profile or personality type, you will find it difficult to earn profits in the long run and your chances of success will reduce.
Forex Traders are different
There are five different types of trading personalities, according to Dr. Kenneth Reid, a trading coach. This trader personality profile is known as AWARE, which is an acronym made from the initials of the five personality types.
These are as follows:
- Agrarian or Farmer: This type of trader is patient and looks for a simple trading strategy that they can use repetitively. They are consistent and follow trends. However since this type of trader believes in hard work and wants returns for their efforts, they tend to get really upset with the random results in the forex market.
- Warrior: The pit traders in New York and Chicago and a lot of traders in the Market Wizards series signify the Warrior trader. These traders are daring and see opportunities in situations where other traders see only risks. However, such traders blow up some accounts, revenge trade, and double down before they learn.
- Artist: Artist traders are creative, adaptive, and flexible. These types of traders look for patterns as opposed to other traders who see the uncertainty of financial markets. However, artist traders sometimes trade based on their intuition and try to wing it, which can bring nil results.
- Realist: As the name suggests, realist traders trade logically and treat trading as a business. They regularly evaluate their return on investment (ROI). Such traders just focus on making money and do not care if a method works or if their strategy or prediction proves to be right. However, this attitude can distress them during drawdown periods.
- Engineer: These traders have a very rational mindset due to which they like to make spreadsheets and become perfect in trading. They try to be accurate with their methods every time. However, such traders cannot recognize the probability of the market, which they consider as unfocused thinking. Due to their focus on details, they tend to overlook the bigger picture.
These are the five different trader psychotypes. All traders have some attributes from each of these five trading personalities. However, these are generally unconscious and imbalanced. Since most of your characteristics would generally match to one type, you would incorporate the strengths and weaknesses of that trading type. However, when you know your weaknesses as a trader from your personality type, you can try to rectify them by putting in the right efforts and getting some guidance from experts in the field.
Define your “trader type”
You can take some online tests in order to learn about your trader psychological type. Apart from these tests, you can also identify your trader type by reviewing yourself holistically and realistically. You must self-reflect and self-observe so that you can work on your behavioral responses. For this, you must be honest with yourself and see whether you are impulsive, take decisions out of frustration or anger, etc.
A trading log or journal can also help you review yourself. You can use it to record all the emotions that you experienced during different trades you conducted and how those influenced your trading.
This will help you figure out your trading personality type, which will further make you aware of your trading strengths and weaknesses. After knowing your trading psychology, you can accordingly choose your trading methods, strategies, and systems that suit you. This way you can get long-term success as a trader.
Knowing your trading personality type can greatly help you, especially if you are a novice forex trader. Plus, if you have the right mindset while trading, you can become a successful trader. By determining which trading personality you belong to, you can minimize the effects of your emotions while trading in the forex market.
Plus, you can choose the right trading strategies and methods that suit your personality type. This will improve your chances of earning profits and lower your chances of suffering losses in forex trading.