Trading, investment and other financial market activities force a person to make decisions most of the time. Often you do this “one-on-one” with the market. Whether you are attempting a quick scalping, opening mid-term positions or opting for long-term investments – your success in any case depends largely on yourself.
Everyone has their weaknesses
How people behave in different situations is directly dependent on their nature. This is known to be dominated by two components: genotype and phenotype. The first term is pretty clear: we inherit certain genes from our parents and keep them throughout our life… Phenotypes, on the other hand, include behavior traits formed by our upbringing, environment, etc. In other words, these are the traits we acquire over the course of our life.
Some scientists use the term “psychological type” when trying to classify people by their particular traits; but “pure” cholerics, phlegmatics, etc. do not exist in practice. As a result, such classification only makes things more confusing, as each person is unique in their own way. Going back to the topic of our article, we can say that the greatest investors in history and legendary traders belong to different psychological types, often completely opposite ones.
Then how can you use your own personal traits to your advantage? First, let’s try sorting out the emotional states which are traditionally held to be the main enemies of financial activities: fear and greed. The emotional “ups and downs” of following market fluctuations where you have an open position can become a serious threat to making decisions for any person. No matter how phlegmatic and apathetic a person is in normal life, the risk of losing a great deal of money can put anyone out of balance.
Develop the good sides, fight the bad sides
Naturally, your nature largely determines how quickly you will come to terms with this type of activity. But if you try hard enough, sooner or later you will “develop” the right phenotype for trading. Such traits as persistence, ambition, discipline, etc. will come in handy, of course. Nevertheless, you will have to learn to keep your head in a world where losses are a given. By the way, success can be equally dangerous: you may have heard of lucky lottery winners losing their mind after hitting the jackpot, quickly going bankrupt or dying from abusing all sorts of dubious “pleasures.”
Generally, your attitude towards money is an important part of your character, and where your upbringing is of utmost importance. If you are a big spender living from paycheck to paycheck, you will soon find that trading is particularly hard for you. Here is some simple advice: learn to save money “from yourself”; develop a small but immensely important habit of saving, say, 10% of your monthly income. Make this practically an unconscious habit – and your relations with financial markets will immediately improve. If you cannot even make that first small step – everything else will be useless.
Wrapping up, it is important to understand that there is no “good” or “bad” nature for the market. But identifying your strengths and weaknesses and using them to more quickly adapt to trading or investment is quite feasible. Only then will your true nature shine, helping you gain confidence and stable profits.