Dennis
05-12-2008, 01:54 PM
This is a very interesting Trading Personality quiz which raises some pertinent points in the psychological make-up of a trader. I reckon it's well worth the ten minutes or so you'll spend doing it.
Dr Steenbarger has his own website at www.brettsteenbarger.com which has a lot of interesting articles and links.
Three Dimensions (3D) Trader Personality Quiz
Brett N. Steenbarger, Ph.D.
Note: A version of this questionnaire will appear in Toni Turner’s upcoming book, “Short-Term Trading in the New Stock Market”
The following questions are designed to help you assess facets of your personality that are related to the kinds of trading approaches that are likely to work for you. There are no right or wrong answers, and none of the questions are designed to evaluate your emotional stability or mental health. Rather, we are trying to find out your personal style, so that you can match it to your trading style. Each item consists of two statements. Please choose the statement that best describes you:
1a) I often arrive early for appointments and events to make sure I’m not late.
1b) I’m not very time-oriented and often show up late to appointments and events.
2a) When a problem occurs in my trading, I first feel frustrated and vent my feelings either outwardly or at myself.
2b) When a problem occurs in my trading, I first try to focus on what went wrong and what I can do to fix it.
3a) When I go out to eat, I generally go to my favorite restaurants and order my favorite foods.
3b) When I go out to eat, I like to try new and unfamiliar restaurants and foods.
4a) I tend to be detail-oriented and try to get each aspect of a job done as well as I can.
4b) I focus on the big picture instead of details and don’t sweat the small aspects of a job.
5a) If you could hear the thoughts in my head as I’m trading, you’d hear worried or negative thoughts.
5b) If you could hear the thoughts in my head as I’m trading, you’d hear me analyzing the market action.
6a) If I had a choice of car to drive, I would choose one that is comfortable and quiet.
6b) If I had a choice of car to drive, I would choose one that is fast and that handles well.
7a) I would be good at following a diet or exercise program.
7b) I would often cheat on a diet or exercise program.
8a) It is hard for me to shake off setbacks in the market.
8b) I take market setbacks as a cost of doing business.
9a) I like vacations that are peaceful and relaxing.
9b) I like vacations where you see and do a lot of different things.
10a) I get routine maintenance done on my car when it is scheduled.
10b) I don’t follow deadlines for routine maintenance on my car.
11a) Sometimes I feel on top of the world in the market; other times, I’m down or down on myself.
11b) I don’t have many emotional ups or downs in the market.
12a) I would like a job with a stable company that pays a guaranteed salary and benefits, even if I might not get rich.
12b) I would like a job with a startup company that offers me a chance to get rich, even if I might get laid off if things don’t work out.
13a) I try to eat healthy foods and get a good amount of exercise and rest.
13b) I’m very busy and don’t always eat, exercise, and sleep as I should.
14a) I trade by my gut.
14b) I trade with my head.
15a) I avoid arguments and conflict.
15b) I like to argue and hash things out.
Scoring
Items 1, 4, 7, 10, and 13 measure a personality trait called “conscientiousness”. A conscientious person is someone who has a high degree of self-control and perseverance. If you scored mostly a) responses for these items, you are high in conscientiousness. Conscientious traders are good rule-followers, and they often do well trading mechanical systems. Traders who are low in conscientiousness will have difficulty following explicit rules and often trade more discretionarily. Ideally, you want a style of trading that is more structured and detail-oriented if you are more conscientious. Trying to trade in a highly structured manner will only frustrate a trader who is low in conscientiousness. Such a trader would do better with big picture trades that do not require detailed rules and analysis. Similarly, very active trading with rigid loss control will come easier to the conscientious trader; less frequent trades with wider risk parameters will come easier to the trader lower in conscientiousness.
Items 2, 5, 8, 11, and 14 measure a personality trait called “neuroticism”. Neuroticism is the tendency to experience negative emotions. If you scored mostly a) responses for these items, you are relative high in neuroticism. The trader prone to neuroticism tends to experience more emotional interference in his or her trading. Wins can create overconfidence; losses can create fear and hesitation. The trader who is low in neuroticism is more likely to react to trading problems with efforts at problem solving and analysis. He or she will not take wins or losses particularly personally. Neuroticism is a mixed bag when it comes to trading. Often the person who is high in neuroticism is emotionally sensitive and can use this sensitivity to obtain a gut feel for market action. The trader who is low in neuroticism may experience little emotional disruption with trading, but may also be closed off to subtle, intuitive cues when a trade starts to go sour. In my recent experience, I have been surprised at how successful gut traders are often relatively neurotic traders. Very active trading methods are particularly challenging for such traders, as they don’t allow much time for regaining emotional equilibrium after losses. This can lead to cascades of losses and significant drawdowns of equity. It is much easier for the non-neurotic trader to turn losses around, since these are less likely to be tied to self-esteem.
Items 3, 6, 9, 12, and 15 measure a trader’s risk aversion. A risk-averse trader is one who cannot tolerate the possibility of large losses and who would prefer smaller, more frequent wins with controlled losses to larger wins with greater drawdowns. If you scored mostly a) responses for these items, you are a relatively risk-averse trader. Trading with careful stops and money management, and trading smaller time-frames where risk can be controlled with the holding period will come most naturally for the risk-averse trader. The risk-seeking trader is one who enjoys stimulation and challenge. Larger positions and longer holding periods are easier to tolerate for the risk-seeking trader. Very often, the risk-seeking trader will be impulsive in entering trades and will have difficulty trading during periods of boredom (low volatility). The risk-averse trader often experiences difficulty hanging onto winning trades and will cut profits short to avoid reversals. This trader will be challenged during periods of high market volatility. Position sizing is key and often overlooked as a trading variable. Trading too small will bore the risk-seeking trader, who will then lose focus. Trading too large will overwhelm the risk-averse trader, who will also then lose focus.
Ultimately it is the blending of these three dimensions of trader personality and not any one in isolation that is most important in shaping trading outcomes. In my experience, the traders who are most poorly suited to trading are those that are risk seeking and who are low in conscientiousness and high in neuroticism. Such traders often take large gambles on impulse, and very often those impulses are driven by emotional frustrations. An example would be a trader who gets frustrated after a loss and doubles his position size on the next trade just to make the money back quickly.
Conversely, I have seen very few successful traders who were highly risk-averse. The risk-averse trader, particularly who is high in neuroticism, is motivated more by a fear of loss than a desire for gain. This makes it difficult to sustain meaningful position sizes during promising trades. Often such traders berate themselves for being self-defeating or sabotaging, but the reality is that they might be better suited for investing than trading.
If I had to identify an ideal personality pattern for traders, I would say that such a person would be risk-tolerant, low in neuroticism, and high in conscientiousness. Such traders are generally good at following trading rules (entries, exits, money management) and disciplined in their preparation. They don’t take losses personally, which gives them the perseverance to weather losing periods. When they see a good trade, they are comfortable trading in size, so that the average size of their wins exceeds that of their losses.
Brett N. Steenbarger, Ph.D. is Associate Professor of Psychiatry and Behavioral Sciences at SUNY Upstate Medical University in Syracuse, NY. He is also an active trader and writes occasional feature articles on market psychology for MSN’s Money site (www.moneycentral.com). The author of The Psychology of Trading (Wiley; January, 2003), Dr. Steenbarger has published over 50 peer-reviewed articles and book chapters on short-term approaches to behavioral change. His new, co-edited book The Art and Science of Brief Therapy (American Psychiatric Press) is due for publication during the first half of 2004. Many of Dr. Steenbarger’s articles and trading strategies are archived on his website, www.brettsteenbarger.com.
Dr Steenbarger has his own website at www.brettsteenbarger.com which has a lot of interesting articles and links.
Three Dimensions (3D) Trader Personality Quiz
Brett N. Steenbarger, Ph.D.
Note: A version of this questionnaire will appear in Toni Turner’s upcoming book, “Short-Term Trading in the New Stock Market”
The following questions are designed to help you assess facets of your personality that are related to the kinds of trading approaches that are likely to work for you. There are no right or wrong answers, and none of the questions are designed to evaluate your emotional stability or mental health. Rather, we are trying to find out your personal style, so that you can match it to your trading style. Each item consists of two statements. Please choose the statement that best describes you:
1a) I often arrive early for appointments and events to make sure I’m not late.
1b) I’m not very time-oriented and often show up late to appointments and events.
2a) When a problem occurs in my trading, I first feel frustrated and vent my feelings either outwardly or at myself.
2b) When a problem occurs in my trading, I first try to focus on what went wrong and what I can do to fix it.
3a) When I go out to eat, I generally go to my favorite restaurants and order my favorite foods.
3b) When I go out to eat, I like to try new and unfamiliar restaurants and foods.
4a) I tend to be detail-oriented and try to get each aspect of a job done as well as I can.
4b) I focus on the big picture instead of details and don’t sweat the small aspects of a job.
5a) If you could hear the thoughts in my head as I’m trading, you’d hear worried or negative thoughts.
5b) If you could hear the thoughts in my head as I’m trading, you’d hear me analyzing the market action.
6a) If I had a choice of car to drive, I would choose one that is comfortable and quiet.
6b) If I had a choice of car to drive, I would choose one that is fast and that handles well.
7a) I would be good at following a diet or exercise program.
7b) I would often cheat on a diet or exercise program.
8a) It is hard for me to shake off setbacks in the market.
8b) I take market setbacks as a cost of doing business.
9a) I like vacations that are peaceful and relaxing.
9b) I like vacations where you see and do a lot of different things.
10a) I get routine maintenance done on my car when it is scheduled.
10b) I don’t follow deadlines for routine maintenance on my car.
11a) Sometimes I feel on top of the world in the market; other times, I’m down or down on myself.
11b) I don’t have many emotional ups or downs in the market.
12a) I would like a job with a stable company that pays a guaranteed salary and benefits, even if I might not get rich.
12b) I would like a job with a startup company that offers me a chance to get rich, even if I might get laid off if things don’t work out.
13a) I try to eat healthy foods and get a good amount of exercise and rest.
13b) I’m very busy and don’t always eat, exercise, and sleep as I should.
14a) I trade by my gut.
14b) I trade with my head.
15a) I avoid arguments and conflict.
15b) I like to argue and hash things out.
Scoring
Items 1, 4, 7, 10, and 13 measure a personality trait called “conscientiousness”. A conscientious person is someone who has a high degree of self-control and perseverance. If you scored mostly a) responses for these items, you are high in conscientiousness. Conscientious traders are good rule-followers, and they often do well trading mechanical systems. Traders who are low in conscientiousness will have difficulty following explicit rules and often trade more discretionarily. Ideally, you want a style of trading that is more structured and detail-oriented if you are more conscientious. Trying to trade in a highly structured manner will only frustrate a trader who is low in conscientiousness. Such a trader would do better with big picture trades that do not require detailed rules and analysis. Similarly, very active trading with rigid loss control will come easier to the conscientious trader; less frequent trades with wider risk parameters will come easier to the trader lower in conscientiousness.
Items 2, 5, 8, 11, and 14 measure a personality trait called “neuroticism”. Neuroticism is the tendency to experience negative emotions. If you scored mostly a) responses for these items, you are relative high in neuroticism. The trader prone to neuroticism tends to experience more emotional interference in his or her trading. Wins can create overconfidence; losses can create fear and hesitation. The trader who is low in neuroticism is more likely to react to trading problems with efforts at problem solving and analysis. He or she will not take wins or losses particularly personally. Neuroticism is a mixed bag when it comes to trading. Often the person who is high in neuroticism is emotionally sensitive and can use this sensitivity to obtain a gut feel for market action. The trader who is low in neuroticism may experience little emotional disruption with trading, but may also be closed off to subtle, intuitive cues when a trade starts to go sour. In my recent experience, I have been surprised at how successful gut traders are often relatively neurotic traders. Very active trading methods are particularly challenging for such traders, as they don’t allow much time for regaining emotional equilibrium after losses. This can lead to cascades of losses and significant drawdowns of equity. It is much easier for the non-neurotic trader to turn losses around, since these are less likely to be tied to self-esteem.
Items 3, 6, 9, 12, and 15 measure a trader’s risk aversion. A risk-averse trader is one who cannot tolerate the possibility of large losses and who would prefer smaller, more frequent wins with controlled losses to larger wins with greater drawdowns. If you scored mostly a) responses for these items, you are a relatively risk-averse trader. Trading with careful stops and money management, and trading smaller time-frames where risk can be controlled with the holding period will come most naturally for the risk-averse trader. The risk-seeking trader is one who enjoys stimulation and challenge. Larger positions and longer holding periods are easier to tolerate for the risk-seeking trader. Very often, the risk-seeking trader will be impulsive in entering trades and will have difficulty trading during periods of boredom (low volatility). The risk-averse trader often experiences difficulty hanging onto winning trades and will cut profits short to avoid reversals. This trader will be challenged during periods of high market volatility. Position sizing is key and often overlooked as a trading variable. Trading too small will bore the risk-seeking trader, who will then lose focus. Trading too large will overwhelm the risk-averse trader, who will also then lose focus.
Ultimately it is the blending of these three dimensions of trader personality and not any one in isolation that is most important in shaping trading outcomes. In my experience, the traders who are most poorly suited to trading are those that are risk seeking and who are low in conscientiousness and high in neuroticism. Such traders often take large gambles on impulse, and very often those impulses are driven by emotional frustrations. An example would be a trader who gets frustrated after a loss and doubles his position size on the next trade just to make the money back quickly.
Conversely, I have seen very few successful traders who were highly risk-averse. The risk-averse trader, particularly who is high in neuroticism, is motivated more by a fear of loss than a desire for gain. This makes it difficult to sustain meaningful position sizes during promising trades. Often such traders berate themselves for being self-defeating or sabotaging, but the reality is that they might be better suited for investing than trading.
If I had to identify an ideal personality pattern for traders, I would say that such a person would be risk-tolerant, low in neuroticism, and high in conscientiousness. Such traders are generally good at following trading rules (entries, exits, money management) and disciplined in their preparation. They don’t take losses personally, which gives them the perseverance to weather losing periods. When they see a good trade, they are comfortable trading in size, so that the average size of their wins exceeds that of their losses.
Brett N. Steenbarger, Ph.D. is Associate Professor of Psychiatry and Behavioral Sciences at SUNY Upstate Medical University in Syracuse, NY. He is also an active trader and writes occasional feature articles on market psychology for MSN’s Money site (www.moneycentral.com). The author of The Psychology of Trading (Wiley; January, 2003), Dr. Steenbarger has published over 50 peer-reviewed articles and book chapters on short-term approaches to behavioral change. His new, co-edited book The Art and Science of Brief Therapy (American Psychiatric Press) is due for publication during the first half of 2004. Many of Dr. Steenbarger’s articles and trading strategies are archived on his website, www.brettsteenbarger.com.