“Psychology is for wimps”, “this is all quackery, the main thing is a trading strategy”, “where there is money, there is no place for emotions” – such stereotypes are gradually becoming a thing of the past. However, traders, as a rule, come to the recognition of the role of psychological factors in trading after a series of failures and merged deposits. When the search for market analysis methods and running from one broker to another does not change the trading indicators, then psychology enters the scene from behind the scenes. By this moment, the trader understands that mistakes are repeated, he cannot control the situation on his trading account, which means that he himself is somehow wrong. Alas, most of the trading literature will offer the trader to “break” and remake himself. For what? The goal is simple – to become a kind of ideal trader with a set of necessary characteristics that promise a financial result in trading.
So is it necessary to give up your identity for the sake of financial success without a guarantee? Is it possible to radically change your character? And is there another way? More on this later.
The material of the article will help you deal with important questions on the types of temperament of traders. You will learn exactly how your temperament affects trading and what to do with it all in order not to lose, but to earn. Our benchmark is trading practice, not hypotheses and promises.
Let's turn to the nature of temperament
Like the color of eyes, hair, at birth, we receive a gift from nature and our parents and specific features of the nervous system. Temperament is the innate properties of the nervous system of an individual (human), which determine his ways of behaving in a particular situation. In the process of personality formation, learning, accumulation of knowledge, and social experience, acquired traits accumulate – this is character.
Who began to determine the types of temperaments? How science looks at it
Dividing people into different groups of temperaments is not a newfangled trend. The trend is rooted in ancient times. Well-known thinkers of antiquity, for example, Hippocrates, Galen, in their conclusions already then proceeded from the opinion that differences in people at the physiological level determine their ways of reacting to the same events, to success and failure. In the future, the development of such sciences as psychiatry, biology, psychophysiology, psychology made it possible to substantiate temperaments from a scientific causal position. The recognized works of Immanuel Kant, Ivan Pavlov, Carl Jung and others systematized knowledge about temperament and character. All over the world, standardized methods for determining temperament and character have been developed and are being used. Today, the definition of the type of temperament is included in the basic set of tests, for example, when vocational guidance for school graduates, it is used for team building in order to achieve the best result and avoid unnecessary conflicts (work on scientific and IT projects, sports team games, crews of submarines, space ships , compatibility of partners in marriage, etc.).
How many temperaments are there?
It is customary to distinguish 4 types of temperament, which are widely known:
- Choleric – unrestrained, courageous, prone to emotional breakdowns, impatient, quick-tempered, has leadership qualities.
- Sanguine – balanced, cheerful, easily survives failures, quickly learns new information, overly self-confident.
- Melancholic – pessimistic, prone to despondency, it is difficult to experience failures, they have a penchant for creativity, for analysis.
- Phlegmatic – calm, slow, does not panic in a situation of stress, not verbose, a high level of self-control, enterprise.
What is the principle of division into temperaments? According to several main criteria:
- Stability of the nervous system:
Stable – phlegmatic, sanguine,
Unstable – melancholic, choleric
- Direction of actions (mental activity):
Introvert (on himself) – melancholic, phlegmatic,
Extrovert (outside) – choleric, sanguine.
- Mobility of the nervous system:
Movable – choleric, sanguine,
Rigid – phlegmatic, melancholic.
- Strength of the nervous system:
Strong type – sanguine, choleric, phlegmatic,
Weak type – melancholic.
Temperament and stock trading
The type of temperament can help achieve financial success, and can significantly complicate a person’s life. The latter occurs for a number of reasons – the wrong trading strategy, timeframe is chosen, there is no support from relatives, and others. Let’s take a closer look at who and what suits.
Choleric – how does it manifest itself in trading?
Even at the training stage, traders with this type of temperament tend to move quickly to practice. At the same time, they are of little interest to a demo account. The main thing is to get to the real market.
Due to the impulsiveness and instability of the nervous system, it is difficult for choleric people to control risks. As a rule, with the advent of the real they are followed by a series of merged deposits. They tend to believe that there is a 100% winning strategy; by brute force, choleric people try to find it as quickly as possible. As a trader’s professional path develops, they may periodically abandon the market, switching to other ways of earning income, and then return to the terminal again.
Difficulties of a choleric trader: they do not devote enough time to analyzing the market and working out their own mistakes, they can easily abandon the planned trading plan in favor of a sudden promotional offer.
Trading strategies: long-term trading strategies are not suitable for choleric people, scalping, day trading, swing strategies are good options.
Melancholic – how does it manifest itself in trading?
Melancholic people often come to the market with someone “for a couple”. It could be an inspirational idea from a friend or a family member. During the training, melancholics can give up without opening a single deal. Their conclusion will be that Forex is too difficult, too risky, too unpredictable, so “I definitely won’t succeed.”
Any failure causes a feeling of inner unrest and a desire to escape from the stress factor. Melancholy traders have a very low stress vice, which makes it unbearable to wait for the same account to come out of a drawdown. The volatility of the market can plunge a trader with this type of character into constant anxiety, which will result in headaches, insomnia and other negative health scenarios.
Difficulties of a melancholic trader: they are too emotional about the uncertainty in the market, it is difficult to make any trading decisions, they are slow to enter and exit a trade, failures in the market are painful for the whole person. Due to the high proportion of the creative component, they can add their own “author’s” touches to the chosen strategies, which is rarely beneficial.
Trading Strategies: Melancholy traders feel comfortable in highly regulated trading conditions, with predictable guaranteed results. For this type of traders, the best option would be long-term investments with low risks. In addition, you can consider similar strategies in social trading services, where there is no need to manage the account on your own.
Phlegmatic - how does it manifest itself in trading?
Measure seven times, cut once. According to this principle, phlegmatic traders make decisions in life and on Forex. Learning is thoughtful and slow. Among those “stuck” on a demo account, there are just the most phlegmatic people. They are also in the lead among those who methodically keep a trading diary and “record all the moves”. Replenishment of the account, as a rule, starts with small amounts. Progress in trading motivates them to spend even more time and energy on the market, which can lead to excellent financial results.
Difficulties of a phlegmatic trader: due to the slow reaction to changes in the market situation, traders often miss the obvious benefit, and can also lead to a partial or complete loss of the deposit.
Trading Strategies: Scalping is obviously not for the phlegmatic, just like any high-frequency trading. Such traders can achieve excellent results in mono trading when it comes to one market, or only one trading instrument is used. Phlegmatic people study it thoroughly, select the best indicators for forecasting, draw information from several trusted sources. Long-term investments are 100% for phlegmatic market participants. They make successful long-term market analysts.
Sanguine – how does it manifest itself in trading?
Although no one has conducted such research, but relying on tons of content from traders and for traders on the Internet, we can say that sanguine traders are the most on Forex. In this type of traders, emotions and reason balance each other. This means that traders do not face significant difficulties in learning to trade, in choosing a trading strategy. They set adequate trading goals, tend to analyze their mistakes in trading. They are diligent and ambitious.
Difficulties of a sanguine trader: excessive emotionality and groundless optimism can become an obstacle in assessing risks, preventing you from completing what you started. They are sensitive to the assessments of others, so criticism of trading results by significant persons from the trading environment or family environment can demotivate a sanguine trader – he will refuse to trade in favor of more normative structured activities. Therefore, enlist the support of the environment in advance.
Trading Strategies: Suitable for a wide range of strategies from scalping to long-term investments. Sanguine traders are not afraid of responsibility, they have good analytical skills, so they make excellent managers in copy trade services, PAMMs, trust management, and hedge funds.
All traders are different. You don’t need to radically change yourself for Forex trading. Moreover, it is unlikely that an adult, formed person will be able to significantly change his innate characteristics. It is necessary in accordance with the temperament to select trading strategies based on their strengths and weaknesses.
If you have not yet decided what type of temperament you have, then on the Internet on psychological sites there are online tests with free access.
However, these temperaments are practically never found in their pure form, so more than 10 mixed subtypes have been described. Moreover, in any mixed type, one of the types of temperament will be dominant, so it is important to know your temperament. As you know, scientia potestas est, which in Latin means “knowledge is power”!