The internet, access to a wealth of trading data, and convenient trading platforms have created a time that is in many ways ideal for the independent trader. One can choose a market to focus on, whether that is stocks or commodities or options, learn as much as possible about the market by studying trends, and ostensibly begin trading using technology that is now readily available.
Will they be successful?
That’s, of course, the golden question, one with an answer that depends on plenty of factors, including how well a trader educates themselves on their given market; how willing they are to face risk; and how they react when facing the very real possibility of losing money.
But, there’s another factor that plays significantly into trading success, and that’s the personality of a trader and, more specifically, how their personality fits with the trading style he or she selected.
As those who have traded before know, various trading styles exist; these correlate primarily with the length of time trades are held for. In turn, whether or not one has the personality or temperament suited, for example, to make quick, same-day trades or, on the other end, the patience to wait days or weeks before taking profit on a trade makes a significant impact on whether or not they will be successful as a trader.
First off, let’s look at some of the main trading types out there:
Swing trading is a short-term trading method traders use to buy and sell stocks. This kind of trading typically takes anywhere from one day to two weeks. Its main objective is to identify an overarching trend and seize gains within that trend.
Day trading is making trades, primarily within a single day. Day traders often buy and sell stocks based on short-term ups and downs in pricing. This type of trading occurs in any marketplace, but is more prominent in the foreign-exchange market and stock market.
Scalping is a term for traders who make trades within seconds of each other, also in varying directions of each other. This is a very speedy style of trading, with profits typically made on small price changes. Traders who specialize in this style must ensure they have an exit strategy, as one large loss could destroy the many small gains they worked so hard to achieve.
Position trading is a style that can last several months. Daily, weekly, even monthly market ups and downs aren’t as important for this kind of trader as their focus is generally about waiting, oftentimes months, to realize larger gains.
So, does the personality of a trader and whether it fits well with the trading style he or she has chosen actually matter? Isn’t it all about educating oneself on market patterns and gaining and learning from trading experience?
As much as experience and education is important in successful trading — and make no mistake about it, they are — whether one’s temperament as a trader works with their trading style is just as important, a point that Matt Choi, who leads trading education company, Certus Trading, emphasizes.
“There’s plenty of opportunity for success as a trader. But, one also needs to enjoy trading and not have it feel like it’s a chore.” Matt Choi explains. “For example, if you’re personality is not suited to staring at a computer screen for most of the day, from my experience, I would suggest that a trader opt away from a trading style like day trading.”
Choi, who has been trading for nearly two decades, has first-hand experience in choosing a trading style that was not well suited to his personality. In his beginning years as a trader, he tried several different styles, including day trading and position trading. As a day trader, although Choi was successful, he hated being stuck in front of a computer for most of the day. On the other hand, as a position trader, he didn’t have the patience to wait months to see trades through.
Through the help of mentor George Fontanills, Certus Trading’s Matt Choi came to the understanding that swing trading was best suited for his own personality and temperament as a trader. An important note to point out, this also correlated to when Choi began to see much more consistent success as a trader.
“Understand who you are as a trader,” Choi adds. “And do not be afraid to experiment with other trading styles. Just because one trading style does not mesh well with your temperament does not mean that you will be an unsuccessful trader – iterate and continue to test out other styles that will be a better fit.”