Contents
- Why Do Traders Struggle at the Start?
- What Happens If You Start from the End?
- 1. Personality and Timeframe
- 2. Personality and Trading Approach
- 3. Personality and Risk Tolerance
- The Advantage You Gain
Why Do Traders Struggle at the Start?
Becoming a professional trader is extremely challenging for most people. That’s why many beginners give up and return to their previous jobs and income sources. This explains why so few traders achieve their dreams of success. But agree that in other fields, the number of those who persistently pursue their goals without quitting is also small. In this sense, trading is no different from other professional activities.
For those who persevere, don’t give up, and push forward, the rewards can be enormous. In this article, I’ll try to boost your chances of success by outlining three key components of your personality psychotype that you need to understand to improve your trading results.
I’ll also show what is likely to happen if you don’t initially define your personality psychotype as a trader. I know we all learn from our mistakes, and each has a unique path. But perhaps someone else’s experience can help you see that going backwards is much harder than starting from the beginning.
What Happens If You Start from the End?
The most common reason I’ve heard for people becoming traders is the desire to make lots of money, work remotely, and travel the world. What a great idea! But that’s where the biggest mistake lies. Such people chase money and obsess over finding the trading method that yields the highest profits.
For the overwhelming majority of traders, this doesn’t work. Eventually, fatigue and disappointment set in. However, with a bit of patience and foresight, you can greatly improve your chances of trading success.
The key is to understand which types of trading methods best match your personality psychotype and lifestyle. This approach lets you choose what suits you best without getting lost in the vast array of strategies and variations.
If you use a trading strategy that conflicts with your personality, no amount of discipline training will save you. You’ll systematically break your trading plan, trade intuitively, and feel stressed during trades. That’s the harsh reality of trading.
I hope I’ve provided enough arguments for understanding your psychotype. With that in mind, let’s examine the three main parameters to determine what fits you personally.
1. Personality and Timeframe
The first thing to determine is your ideal trading timeframe—or, in other words, your “personality timeframe.” This requires some experimentation. Consider these three options as a starting point:
- day trading,
- swing trading,
- long-term investing.
Read this article on how to choose a trading style.
Take a few systems available in the public domain and trade them on a demo account. This will help you feel which timeframe best matches your personality, thinking pace, and daily rhythm. Remember, you’re looking for the timeframe that suits you best—not the system that makes the most money.
2. Personality and Trading Approach
Besides finding the optimal timeframe, you need to select a method for assessing market conditions. Broadly speaking, you need:
- a technical approach (based on price chart movements),
- a fundamental approach (based on news background affecting the asset).
The task here is to start with one method and master it thoroughly before moving on. You can profit by excelling in both or just one. From personal experience, when I traded, I relied more on technicals than fundamentals—about an 80/20 split. These ratios can vary greatly by trader.
If you’re primarily a technical trader, you can divide strategies into three categories:
- breakout models,
- trends,
- reversal models.
Figure out what feels most psychologically comfortable. You can always add more strategies later. Start by deeply mastering one.
3. Personality and Risk Tolerance
The third crucial thing to determine is your personal financial pain threshold or risk tolerance level. You’ve probably heard thousands of times online that you should never risk more than 2% of your capital per trade. That’s great advice. But the question is: how much can you risk?
It’s highly subjective. Determine it not by rigid formulas, but by psychological comfort.
If you fit within the mathematical 2% but feel tension and discomfort, your tolerance is lower. Typically, exceeding your comfort level leads to fear, uncertainty, early trade closures, and discipline issues.
The problem is that demo accounts make it hard to gauge this. You’re not risking real money, so losses don’t feel real psychologically.
Therefore, I recommend opening a small real account—no less than $100—and trying to trade. The amount can be any, but only what you’re not afraid to lose. And never open a large real account right away!
The Advantage You Gain
If you start your trading journey by defining these three parameters, you’ll have far better chances of success. Once you know your timeframe, market assessment approach, and risk tolerance, you’ll know where to go next and what areas to study further. It’s more effective to develop your strengths than to chase money blindly against your nature.
When you seek a mentor (which you’ll do if you progress), understanding these points will make the choice much easier. It’ll save you time and money.
In the next article, we’ll see what happens if you ignore all this and trade everything without considering your psychological traits.
