Essential 5 Personality Strengths and Weaknesses in Forex Trading
Hello Forex traders,
Have you ever analyzed your own trading personality strengths and weaknesses in Forex?
This is a vital step in becoming and/or remaining a successful Forex trader. All Forex traders must establish their key trading personality strengths and weaknesses to maximize the impact of their strengths and minimize the potential damage of their weaknesses.
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This process is always different for every single Forex trader on Earth, simply because each person has their own character, characteristics, experience, psychology, etc. This means good advice for one Forex trader could be mediocre advice for another.
Letโs start by explaining why this process is important and defining trader personality traits. Also, read about the types of forex indicators.
Table of Contents
The Psychology Behind Trading
It is crucial to recognize the psychology behind trading and align it with other key trading components, such as oneโs own trading method, trading strategies, trade management, risk management, money management, and the overall trading plan.
Whoever finds this delicate balance will make profits. Remember, Forex trading is not about being correct and making winning trades. That is important when working as an employee for a company or when doing an exam for school. Forex trading is different. In this business, nobody cares if you are right or wrong. The only one who does care is you.
At the end of the day, the win percentage will not determine a traderโs success in trading. Itโs all about profitability. To be able to make profits, itโs important to have the willingness to take risks and have a coherent, clear, simple, and executable trading plan that creates and sustains an edge.
If the trading plan is the real tool that creates the edge, then, to become profitable, our success rate should be measured via the correct implementation of the trading plan. It is the successful implementation of that plan that keeps the Forex trader focused on the sustainable edge.
In order for any Forex trader to create a trading plan with an edge, one must create a balance between all the various components of such a plan (as mentioned above:ย trading strategy, risk management, money management, the psychology behind trading, and trade management).
All of these components must be aligned and in sync to succeed. Here are a few examples:
- Your trading psychology must support your trading strategy and trading tools.
- Your risk management should be aligned with your trading strategy.
- Your trading psychology should be able to support your trade management plan.
There must be harmony among these things for making and maximizing profit. Any mismatch between these elements will lead to disequilibrium. Trading psychology is one component of the overall trading plan, and this is where knowing oneself becomes important.
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In our trading room, we discuss many of these items on a regular basis. Check out this link to understand why a trading room is so vital in the development of a Forex trader.
Forex Traderโs SWOT Analysis
Establishing oneโs own strengths and weaknesses is, therefore, very important in order to make a coherent and sustainable trading plan. One method of establishing oneโs own strengths or weaknesses is by using a SWOT analysis (or SWOT matrix).
This is a โstructured planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture โฆ [and this] can be carried out for a product, place, industry or person.โ
It entails โspecifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieving that objective.โ
Here are the SWOT analysis examples:
- Strengths (internal factors): Characteristics of the business or project that give it an advantage over others.
- Weaknesses (internal factors): Characteristics that place the team at a disadvantage relative to others.
- Opportunities (external factors): Elements that the project could exploit to its advantage.
- Threats (external factors): Elements in the environment that could cause trouble for the business or project.
One way of using the SWOT analysis is matching and converting. Matching is used to find a competitive advantage by matching the strengths to opportunities. On the other hand, converting is applying conversion strategies to convert weaknesses or threats into strengths or opportunities (or otherwise trying to minimize or avoid them).
Forex trading is a business, and thus, Forex traders, as the owners of their own Forex trading enterprise, should complete this process to map out their own strengths and weaknesses in the field of trading in general and the psychology behind trading specifically. Each trader should critically review it together with the other components of theย trading plan.
Trading Personality Strengths and Weaknesses in Forex
Forex traders usually have certain emotions that hinder their trading success. Most traders have issues with greed, fear, need, regret, and/or false hope, for instance.
These emotions during trading undermine the profit potential of any trader. Why? Well, thatโs because emotions hinder the correct implementation of oneโs trading plan.
What creates these emotions? At the end of the day, it is a traderโsย strengths and weaknesses in Forex thatย lead to these emotions. Impatience might lead to greed. Lack of discipline could lead to (false) hope.
Our task as a trader is to recognize our own strengths and weaknesses and identify where and when these could play out and have an impact on trading decisions.
Most people have certain predominant characteristics.
One method of analyzing this is the โfour color personality test,โ which determines how best to address โeach personality with the goal of creating a harmonious and productive environment.โ
Most of us have a bit of all the color type. Not many of us have only one color. However, most do have a predominant color and a second color type. Check outย this link to read more about these various types.
Yellow Personality Trading Behavior
The yellow personality is regarded as the โsunniest personality.โ People with this kind of personality fear rejection most. They tend to be optimists, enthusiasts, and verbally articulate.
Additionally, they like freedom, friendliness, and positive reinforcement. They are weak in following through, act impulsively, overestimate results, etc.
Red Personality Trading Behavior
The red personality is regarded as the โdominating personality.โ Traders with this type fear failure. They tend to be persistent, problem solvers, take charge and accept challenges.
These traders like new and various activities, control, direct answers, and challenging assignments. They are weak in impatience, over-risking things, and inflexible.
Green Personality Trading Behavior
The green personality is regarded as the โcalm personality.โ These types of traders fear a lack of harmony. They tend to be supportive, agreeable, loyal, and consistent.
Moreover, they like minimal conflict, security, acknowledgment, and opportunity to develop personal relationships. They are weak in change and initiative, overly lenient, and indecisive.
Blue Personality Trading Behavior
The blue personality is regarded as the โperfectionist personality.โ People with this personality fear criticism. They tend to be orderly, disciplined, precise, diplomatic, analytical, and thorough.
Furthermore, they like detail, exact job descriptions, and sufficient time to do things right. They are weak in addressing controversy, indecisiveness, hesitant, and accepting criticism.
Conclusion โ Learning the Traits of a Good Trader
Traders need to find out their personality type and compose aย Forex traderโs SWOTย analysis to find out how this can impact the implementation of their trading plan. Make sure to take some time to explore yourย personality strengths and weaknesses in Forex trading.
Thank you for reading!
Please leave a comment below if you have any questions about Personality Strengths and Weaknesses!
Please check out our article on trading persona for more information.