The Influence Of Temperament On Trading
The influence of temperament in trading:
Sanguine people are optimistic traders, ready for internal drawdowns and large trades.
Cholerics are risk-prone and respond quickly to changes.
Melancholic people are conservatives and take a long time to weigh risks.
Phlegmatic people love scalping and know how to restrain any emotions.
Temperament is a set of innate mental and emotional traits that influence a person's behavior and reactions to external stimuli. It has a significant impact on all aspects of a person's life, including trading.
Temperament type and trading on financial markets
There are four main types of temperament:
-
Sanguine is a sociable, energetic, and cheerful person. They quickly grasp new information, easily adapt to change, and are not afraid to take risks. Sanguines are well-suited for trading, as they can quickly make decisions and are not afraid to take action.
-
Sanguine is a sociable, energetic, and cheerful person. They quickly grasp new information, easily adapt to change, and are not afraid to take risks. Sanguines are well-suited for trading, as they can quickly make decisions and are not afraid to take action.
-
Phlegmatic is a calm, balanced, and rational person. They are unhurried and do not like to rush. Phlegmatics can be successful traders, but they need to learn to make decisions faster and not be afraid to take risks.
-
Melancholic is a sensitive, vulnerable, and impressionable person. They are prone to doubt and hesitation. Melancholics can be successful traders, but they need to learn to control their emotions and not be afraid to take risks.
Sanguine trader
Sanguine traders tend to set ambitious goals. They strive for success and self-realization. They want to make a lot of money, travel the world, and live an exciting life.
👍 Advantages
Sanguine traders have a number of advantages that can help them succeed in the financial markets. They are:
• Energetic and cheerful. They are not afraid of challenges and are willing to work hard to achieve their goals.
• Quick to grasp new information. They are easily trainable and can quickly adapt to change.
• Not afraid to take risks. They are willing to take risks to succeed.
👎 Disadvantages
Sanguine traders also have a number of disadvantages that can hinder their path to success. They are:
• Impulsive. They often make decisions without thinking about the consequences.
• Not patient enough. They want to see results immediately and are not always willing to wait.
• Can be prone to emotions. They can be influenced by emotions, which can lead to mistakes.
Sanguine traders can be successful in the financial markets if they are willing to work hard to overcome their impulsiveness and impatience. They can also benefit from developing a trading plan and using risk management techniques.
Choleric trader
Choleric traders tend to set high goals. They strive for success and dominance. They want to be the best at what they do.
👍 Advantages
Choleric traders have a number of advantages that can help them succeed in the financial markets. They are:
• Active and decisive. They are not afraid of challenges and are willing to fight for their goals.
• Impulsive. They quickly make decisions and are not afraid to act.
• Not afraid to take risks. They are willing to take risks to succeed.
👎 Disadvantages
Choleric traders also have a number of disadvantages that can hinder their path to success. They are:
• Can be aggressive. They may behave aggressively, which can lead to conflicts with other traders.
• Can be quick-tempered. They may quickly lose their temper, which can lead to mistakes.
• Can be impatient. They want to see results immediately and are not always willing to wait.
Additional Thoughts
Choleric traders can be successful in the financial markets if they are willing to work on themselves and overcome their disadvantages. They can also benefit from developing a trading plan and using risk management techniques.
Here are some specific tips for choleric traders:
-
Before making a decision about a trade, take a deep breath and think about the consequences.
-
If you feel yourself starting to get angry or frustrated, take a break and come back to trading later.
-
Seek help from a psychologist or therapist who can help you develop your emotional skills.
Remember that temperament is not a sentence. Even if you are a choleric, you can learn to control your emotions and succeed in trading.
Phlegmatic trader
Phlegmatic traders tend to set specific, achievable goals. They strive for stability and security. They want to provide themselves and their families with a comfortable life.
👍 Advantages
Phlegmatic traders have a number of advantages that can help them succeed in the financial markets. They are:
• Calm and balanced. They are not prone to emotions and can make rational decisions.
• Carefully consider their actions. They do not make hasty conclusions and always gather all the necessary information before making a decision.
• Know how to manage risk. They are not prone to risk and always use stop-losses and take-profits.
👎 Disadvantages
Phlegmatic traders also have a number of disadvantages that can hinder their path to success. They are:
• Can be slow. They are not always ready to make quick decisions, which can lead to missed opportunities.
• Can be passive. They do not like to take risks and can miss opportunities to make a profit.
Additional Thoughts
Phlegmatic traders can be successful in the financial markets if they are willing to work on themselves and overcome their disadvantages. They can also benefit from setting clear goals and deadlines for achieving them, limiting their risks, and seeking help from a psychologist or therapist.
Here are some specific tips for phlegmatic traders:
-
Before making a decision about a trade, think about how it will affect your long-term goals.
-
If you feel yourself starting to doubt yourself, seek advice from a more experienced trader.
-
Do not be afraid to experiment with different trading strategies to find one that suits you.
Remember that temperament is not a sentence. Even if you are a phlegmatic, you can learn to be more decisive and active and succeed in trading.
Melancholic trader
Melancholic traders tend to set high, ambitious goals. They strive for success and self-realization. They want to achieve great things and leave their mark on the world.
👍 Advantages
Melancholic traders have a number of advantages that can help them succeed in the financial markets. They are:
• Analytical and insightful. They are able to deeply analyze information and see patterns that elude others.
• Carefully consider their actions. They do not make hasty conclusions and always gather all the necessary information before making a decision.
• Know how to manage risk. They are aware of the risks associated with trading and take steps to minimize them.
👎 Disadvantages
Melancholic traders also have a number of disadvantages that can hinder their path to success. They are:
• Can be pessimistic. They tend to see only the negative aspects of a situation, which can lead to mistakes.
• Can be insecure. They often doubt their abilities, which can lead to procrastination or inaction.
• Can be too sensitive to failure. They take defeats hard, which can have a negative impact on their psychological state.
Additional Thoughts
Melancholic traders can be successful in the financial markets if they are willing to work on themselves and overcome their disadvantages. They can also benefit from working on their self-esteem, finding a mentor or coach, and developing self-control skills.
Here are some specific tips for melancholic traders:
-
Before making a decision about a trade, think about what could happen in the worst-case scenario.
-
If you feel down or insecure, postpone making a decision until you feel better.
-
Do not be afraid to ask for help from other traders or professionals.
Remember that temperament is not a sentence. Even if you are a melancholic, you can learn to control your emotions and succeed in trading.
Temperament and Trading Strategies
Choleric and Intraday Trading:
• Ideal for quickly reacting to short-term trends.
• Riskier strategies that require fast decision-making.
Sanguine and Trend Trading:
• Adheres to trend strategies with a long-term perspective.
• Able to withstand market fluctuations and long-term investments.
Melancholic and Positional Trading:
• Specializes in long-term investments.
• Thorough research and analysis of fundamental data.
Phlegmatic and Scalping:
• Suitable for low-risk scalping with quick entries and exits.
• Prefers stable and predictable markets.
How temperament affects decision-making
Temperament affects how a person makes decisions. Sanguines and cholerics are prone to impulsive decisions, while phlegmatics and melancholics are prone to thoughtful decisions.
In trading, it is important to be able to make sound decisions in the face of uncertainty. Impulsive decisions often lead to mistakes and losses. Therefore, traders with impulsive temperaments need to learn to control their emotions and make decisions more thoughtfully.
How temperament affects risk management
Temperament also affects how a person views risk. Sanguines and cholerics are prone to risk, while phlegmatics and melancholics are prone to conservatism.
In trading, it is important to be able to manage risk. Risk-taking traders often lose money, while conservative traders may miss opportunities for profit. Therefore, traders with risk-taking temperaments need to learn to manage risk more effectively.
How temperament affects trading psychology
Temperament also affects trading psychology. Sanguines and cholerics are more prone to emotions, while phlegmatics and melancholics are more prone to logic.
Emotional traders often make mistakes based on emotions. Logical traders are more prone to rational decision-making. Therefore, traders with emotional temperaments need to learn to control their emotions and make decisions more rationally.
How to adjust temperament for trading
Temperament is an innate personality trait that cannot be completely changed. However, it can be adjusted through self-development and psychological work.
Traders with impulsive temperaments need to learn to control their emotions and make decisions more thoughtfully. For this, you can use various techniques, such as meditation, auto-training, cognitive-behavioral therapy.
Traders with risk-taking temperaments need to learn to manage risk more effectively. For this, you can use various risk management strategies, such as stop-losses, take-profits, margin requirements.
Traders with emotional temperaments need to learn to control their emotions and make decisions more rationally. For this, you can use various techniques, such as meditation, auto-training, cognitive-behavioral therapy.
Conclusion
Here are some tips that can help traders adjust their temperament:
-
Be aware of your temperament. First and foremost, it is important to be aware of your temperament and its impact on trading. This can be done by taking a temperament test or consulting a psychologist.
-
Set goals. Determine what goals you want to achieve in trading. This will help you stay focused on your goals and avoid being distracted by emotions.
-
Develop a trading plan. Develop a trading plan and stick to it. This will help you make more rational decisions and avoid mistakes.
-
Control your emotions. Learn to control your emotions and not give in to emotions during trading. For this, you can use various techniques.
Temperament has a significant impact on trading. Traders need to consider their temperament and work on adjusting it to improve their results.
FAQs
What is the personality of a trader?
Traders are often described as being intelligent, analytical, and decisive. They are also often risk-takers who are willing to put their capital on the line in order to make a profit. However, there is no single "trader personality," and many successful traders come from a variety of backgrounds and have different personality traits.
What type of people are good at trading?
People who are good at trading are typically able to combine both analytical and creative thinking. They are also able to make decisions under pressure and are not afraid to take risks. However, it is important to note that trading is not a get-rich-quick scheme, and there is no guarantee of success. Even the most talented traders can lose money if they are not careful.
How do traders behave?
Traders behave based on their strategies and personality traits. Emotional control, risk management, and adherence to a chosen trading plan are common behavioral traits among successful traders.
What personality is best for trading?
There is no single "best" personality for trading, as different temperaments can have both advantages and disadvantages in the markets. However, some common traits that are often seen in successful traders include:
-
Discipline: The ability to stick to a trading plan and avoid impulsive decisions is essential for long-term success.
-
Patience: Trading can be a slow and frustrating process, and successful traders need to be able to remain patient and disciplined even during periods of drawdown.
-
Risk management: The ability to manage risk and avoid large losses is crucial for survival in the markets.
-
Analytical skills: Successful traders need to be able to analyze market data, identify trends, and make informed decisions.
-
Emotional control: The ability to control emotions and avoid making decisions based on fear or greed is essential for long-term success.
Glossary for novice traders
-
1
Trading
Trading involves the act of buying and selling financial assets like stocks, currencies, or commodities with the intention of profiting from market price fluctuations. Traders employ various strategies, analysis techniques, and risk management practices to make informed decisions and optimize their chances of success in the financial markets.
-
2
Risk Management
Risk management is a risk management model that involves controlling potential losses while maximizing profits. The main risk management tools are stop loss, take profit, calculation of position volume taking into account leverage and pip value.
-
3
Broker
A broker is a legal entity or individual that performs as an intermediary when making trades in the financial markets. Private investors cannot trade without a broker, since only brokers can execute trades on the exchanges.
-
4
Take-Profit
Take-Profit order is a type of trading order that instructs a broker to close a position once the market reaches a specified profit level.
-
5
Scalping
Scalping in trading is a strategy where traders aim to make quick, small profits by executing numerous short-term trades within seconds or minutes, capitalizing on minor price fluctuations.
Team that worked on the article
Alex Smith is a professional day trader for a proprietary trading firm within the foreign exchange (forex) and crypto markets. His area of expertise is day trading and swing trading within the 15min-4hr time frames for both the London and NY open.
Dr. BJ Johnson is a PhD in English Language and an editor with over 15 years of experience. He earned his degree in English Language in the U.S and the UK. In 2020, Dr. Johnson joined the Traders Union team. Since then, he has created over 100 exclusive articles and edited over 300 articles of other authors.
Mirjan Hipolito is a journalist and news editor at Traders Union. She is an expert crypto writer with five years of experience in the financial markets. Her specialties are daily market news, price predictions, and Initial Coin Offerings (ICO).