I recently had a discussion with another trader (@stockguy22) about how traders migrate to a specific type of trading based on their prior career or personality traits and how traders should be aware of how these influences impact their trading. There are a million ways to make money in the markets, and the most successful traders have all figured out how to adapt to a methodology that allows them to see the markets more clearly. You see, the markets just "are", and it is how we interpret them that ultimately factors into how successful we are as traders. We can't force the markets to adapt to what we think should happen and this is a trap many traders fall into unwittingly.
I've mentioned before how a fine line separates so many aspects of trading and this is no exception. While we should definitely migrate to our strengths, we need to be aware of any cognitive biases that can develop and hamper your trading. If you think about your background or personality you should notice that how you view the world shapes how you view the markets. The task is to attempt to craft your "edge" in the market place by taking advantage of your strengths and compensating for your risk tolerance and weaknesses. For instance, I have a background in IT as an engineer and I've noticed that a huge proportion of traders that come from this area end up trading technically and often attempt to automate many if not all components of their trading system. This makes perfect sense, as an engineers world is bound by rules and order and they are not intimidated by complex software or programming. Engineers should not shy away from their strength, but we also need to realize that the rules that exist in their world also don't fully apply to the financial world. The OSI model will always be the same, but the markets don't always abide by the rules. They are the culmination of millions of people acting on their beliefs, rational and irrational, so traders need to understand that while their strengths can help them see the market better, sometimes the markets will do the unexpected and not follow the rules.
It's interesting that I ended up in IT and then the markets, as I have always hated numbers and always had a more creative personality pursuing artistic interests such as photography. This could be one reason why I prefer the visual aspect of studying charts and the psychology behind the traders moving the stock, rather than reading a balance sheet. There are multiple ways to analyze the markets and I believe there is a certain art to reading charts. There are times when volume matters more than others, and sometimes its more feel than having a stock meet certain criteria. However, I also realize that I always need to be on alert for my feelings forming a cognitive bias that would keep me out of a good trade based. This is one of the reasons it is so difficult to trade; traders are constantly battling conflicting thoughts.
It's really amazing if you think about how many people have missed most of the currently rally based on their thoughts of what the markets "should" be doing. Even more surprising is that many people in this camp are very intelligent. I'm not criticizing anyone who may of missed the rally; I know trading is difficult, but traders need to be aware of how they may be subconsciously sabotaging themselves. Think about your background and personality. Were you or are you currently a Doctor, Lawyer, Athlete, Actor, Accountant or teacher? Think about how your training, personality and current mindset influence your trading. There is no simple solution to adapting to the markets, but adapting your personality to a system that works for you is absolutely necessary.
This subject probably deserves much more time and space than I can devote to it, but hopefully this can help some traders who had never thought of this. Maybe I can get an expert on this subject like Dr. Phil Pearlman to discuss this on an upcoming Market Shrinkology show.
If you have a good example of how your career or personality impacts your trading feel free to leave a comment.
Good Trading,
Joey
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