6 mins read
Every forex trader has a unique personality that shapes their approach to the market. From emotions to skills and knowledge, these factors all come together to create a complex and dynamic trading style that requires a carefully crafted trading plan.
Now, the big question is, which trader personality type are you?
Are you a risk-taker who likes to go all-in or a planner who carefully weighs every decision?
Perhaps you're a skeptic who always questions the status quo or a trend follower who takes cues from the crowd.
In this article, we'll be taking a close look at the different forex trader personality types in the market. But don't worry, we won't stop there. We'll also show you how to identify and leverage your trading personality type for greater success in the forex market.
Types of Traders in Forex
In his book “Trade Your Way to Financial Freedom," Dr. Van K. Tharp – a professional psychologist, writes about the 15 different personality types of traders.
These types are by no means exhaustive, but they offer a useful framework for understanding the different ways that traders approach the market. For example, author Richard Weissman of “Mechanical Trading Systems: Pairing Trader Psychology with Technical Analysis,” identified only 3 types of traders:
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Trend following traders
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Mean reversion traders
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Day traders
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Tharp’s Trader Personality Types include 15 types of traders in forex:
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The Accurate Trader
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The Administrative Trader
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The Artistic Trader
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The Adventurous Trader
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The Detailed Trader
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The Facilitative Trader
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The Fun Loving Trader
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The Independent Trader
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The Innovative trader
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The Planning Trader
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The Socially Responsible Trader
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The Spontaneous Trader
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The Strategic Trader
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The Supportive Trader
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The Values-Driven Trader
So, what type of trader are you?
You don’t have to guess it anymore because there is a free trader personality test that you can take and find out where you stand.
What kind of trader are you?
The Myers-Briggs Type Indicator (MBTI) test can be a helpful tool in identifying the kind of trader that you are. The MBTI 100-question quiz scores people across four continuums:
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introversion (I) or extraversion (E),
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sensing (S) or intuition (N),
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thinking (T) or feeling (F),
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and judging (J) or perceiving (P).
For example, an ENTJ type tends to be more extroverted, thinks big picture, prefers rationality over personal feelings, and enjoys structured environments.
On the other hand, an ISFP type leans more towards introversion, focuses on details, relies on their instincts or "gut feeling" when making decisions, and thrives in less structured environments.
Personality Types Best Suited For Forex Trading
Apart from Tharp’s types of traders in forex, as we’ve discussed, other types of trader personalities are defined by their trading frequency and timeframe used. These types include:
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The scalper – engages in high-frequency trading, holding positions for only a few seconds or minutes to gain small profits from each trade. This approach requires quick reflexes and the ability to make split-second decisions, so it makes a good fit for the accurate trader personality type.
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The day trader – opens and closes positions within a single day. This can be a great fit for full-time forex traders who are looking to make a living from trading. Usually, the innovative trader falls into this category.
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The swing trader – This style is great for traders who want to capture larger market moves without the stress of day trading. Best fit for strategic traders.
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The position trader – holds positions for longer periods (months, years) and relies on fundamental analysis to make trading decisions. Planning traders and values-driven traders are a great fit for this trading style.
So, what kind of trader are you from this list?
Each type of trader personality has its own set of advantages and challenges, and traders must carefully consider their goals and understand their trader personality type before deciding which type is right for them.
What Personality Type is Good at Scalping?
Scalping is the go-to strategy for day traders who are focused, determined, fast thinkers that can make split-second decisions and have an eye for quick price movements in the market. Scalpers also need a high tolerance for risk and a certain type of personality that thrives in high-pressure environments.
Scalpers are typically very aggressive in their trading style and are always looking for the next profit opportunity.
They often find themselves in the intermediate levels of the market's range and take advantage of short-term price movements.
What Personality Type is Good at Day Trading?
If you're an independent and innovative trader, then you might be suited for day trading.
According to Weissman, mechanical systems benefit short-term traders the most, as they provide predefined entry and exit levels with pre-determined risk-reward ratios.
This can relieve some stress from the trader, but it's not all sunshine and rainbows.
They require constant attention and monitoring during trading hours, and traders must be prepared to take action on valid signals at any moment.
What Personality Type is Good at Swing Trading?
If you're a patient trader who can sit and wait for the right moment to strike, swing trading is your thing. This type of trader personality is known as the "sniper," and they are characterized by their ability to wait for the perfect entry and exit conditions before making a trade.
Snipers spend hours analyzing charts, looking for key levels such as support and resistance, Fibonacci levels, and supply and demand zones. They patiently wait for the price to hit their predetermined level and then take their shot.
Swing traders only take one trade at a time, but when they do, it's precise and accurate. Snipers are also known for taking long rides on their trades. They expect to take the price at the very beginning of a rally or drop and ride the cycle for as long as possible.
If you're the type of person who is calm, patient, and can wait for the perfect moment to make a move, then you might just have what it takes to be a successful sniper in the swing trading game.
Final Thoughts
After looking at various forex trader personality types and their suitability for trading, it's important to note that not everyone is cut out for this challenging profession. Dr. Tharp has identified three types of traders that may struggle to succeed in the forex market – the Artistic Trader, the Fun Loving Trader, and the Supportive Trader.
However, it's not all doom and gloom, if they are committed to improving their trading habits and learning from their mistakes.
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