In a recent article, we spoke about confidence as it pertains to trading. But one sentence in the article attracted attention: For as hard as it may be to hear, most people aren’t cut out for trading. Some clients started asking the question: am I really cut out for trading? How would I know?
I’m not a psychologist nor a genius. All I have is practical experience in helping traders up the learning curve. So in this article I’ll attempt to convey the key components that always stick out like a sore thumb when I’m speaking to a person that has the mindet of a trader – whether he knows it or not.
Master Trader Mindset Quiz
At this point, you’re probably expecting a lengthy explanation of my findings. I’ve found this to be useless. Many people, when reading about certain qualities, tend immediately to think about times in their lives when they demonstrated certain qualities. Seldom do people actually generate an unbiased assessment of themselves (overconfidence bias at it’s purest!).
Instead, I’ve found that a questionnaire works wonders – if you don’t yet know the answers of course! For example, I use a questionnaire for identifying whether a candidate is suitable forcoaching or not. I assess his personal situation, his time availability, his capitalization, his tolerance towards uncertainty, his understanding of basic market dynamics, his goals and motivation.
So please try to be as sincere as possible when answering the following quiz, which will help you understand whether you possess the qualities that I have seen in all successful traders I’ve helped over the years. You will find the answer sheet at the end of the quiz.
- What is worse: anxiety or frustration?
- Did you ever get into trouble in order to make something important happen?
- Which do you treasure more: instinct or wisdom? Why?
- Which do you treasure more: imagination or analysis? Why?
- Rapidly, choose one option from each of the following word pairs. There is no right or wrong answer.
Consistency or Flexibility | Proven or Potential | Careful or Bold | Explore or Settle | Predictable or Possible | Bonus or Salary | Safety or Opportunity | Medal or Joy | Puzzle or Blank Canvas | Nimble or Steady | Change or Constant | Known or Unknown | Patience or Excitement | Frontier or Home | Set or Open | Wild or Tame | Variety or Certainty | Inherit or Create
6. Which is a better quality for a leader to possess: passion or professionalism?
7. What is your opinion about taking work home with you? Do you take work home with you?
8. How much of “who you are” is “what you do”?
9. Rapidly, choose one option from each of the following word pairs. Again, there is no right or wrong answer.
Own or Manage | Suggest or Direct | Lead or Participate | Shape or Control | Captain or Navigator | Ownership or Title | Grace or Power | Complete or Reflect | Aspire or Accomplish | Membership or Possession | Knowledge or Power | President or Minister | Profit or Equity
10. Could you tell me about a particularly challenging experience you’ve had? How did you overcome it?
11. Could you describe a life situation when it was extremely important that you convince others?
13. What do the financial markets represent to you?
14. After a loss, how do you react? What do you do?
15. You have delegated part of your savings to an external money manager. After a 20% run-up, the money manager starts to take consecutive hits and is down 3%. Imagine your response. How do you feel? What action would you take?
16. Think about difficult decisions you’ve had to make at work, or in your own life. How did you actually make the decision?
Now that you’ve taken time to go through the quiz, check the answer sheet and find out whether you possess the predisposition to become a successful trader, or whether your talents lie elsewhere.
It’s Just a Job
Take it from me: I grew up in a household where the markets & money were a primary focus. So imagine my surprize when, along my journey up the learning curve, I discovered that my values were quite different – in some cases opposite.
There is far too much hype going around about “trading” and “investing” as the only way to have a great lifestyle. And it’s largely false. “Great lifestyle” means different things to different people.
In the town where I live, there’s an old lady that moved back to Italy 25 years ago after being born in France and having worked in Germany. Many people might say that she has been living a great lifestyle here: she has no debt, her own house overlooking hills and sea, and not a worry in the world. And yet speaking with her, she talks about the years in Germany when she was working in the shipping department of a business. She had come to memorize the addresses of over 100 clients and had become the quickest person to package and send out the orders. That gave her satisfaction. She liked the activity, she felt useful.
Another person I speak to in the early morning, is one of the garbage collectors of the town. He’s in his little truck, going along the streets picking up garbage, sweeping the streets clean, and he never fails to bring some food for the stray cats in the main square. He once spoke about his frustration when people fail to separate paper from plastic and just throw everything in one bag. “Do you realize how important hygene is? Whether it’s personal hygene or keeping our public spaces clean! And people jsut show no respect”. Who would have expected a garbage collector to know that advances in personal hygene since the Medieval times has defeated more illnesses than the progress in medicine?
The common denominator is that these people did (or continue to do) jobs that have meaning. They feel useful to others, and through that, they achieve satisfaction. Sure, having more money definitely helps during stressful times or when unexpected expenses appear (think dentist appointments, popping a tyre, repairing damage after a natural disaster, etc.). But money alone will not make you happy. Moreover, if you’re only interested in the money, you’ll most likely be attached to the outcome of every single trade and have mood swings that echo your p&l.
Over to You
So, above & beyond the questionnaire above, ask yourself this question: are you into trading for the money alone? And if you want to do it for the money, is it for personal benefit or do you have plans to give back some of it, in the form of donations or charity? Once again, the best traders I know (not only the people I’ve assisted) all give back, in some form or another.
Trading is just a job. It may also not be the right job for you. I want you to know that it’s OK. If you go through the questionnaire and find that you may not have what it takes to trade, everything will be OK.
Go out and find something you’re truely passionate about. Find your calling. If you like the markets, but you just can’t stand trading, perhaps look into research positions or quantitative analysis or something that allows you to work in the industry. Broaden your view. Life is way too short to spend it chasing Chimaeras.
About the Author
Justin is a Forex trader and Coach. He is co-owner of www.fxrenew.com, a provider of Forex signals from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.
Resource used: Harvard Business Review