Thursday, November 29, 2007

The Promethian Trader

I may be projecting a little here, but I suspect that most who are new to trading generally approach the subject as a problem largely consisting of how to build and implement a consistently profitable trading system.

While there are several excellent blogs that deal largely with the trader’s personality (most notably Brett Steenbarger’s TraderFeed and Corey Rosenblum’s Afraid to Trade), I have yet to say much of anything on this subject, even though I am strongly of the opinion that eventually all traders will realize psychology is the most important part of trading, even those who are using mechanical systems. In Trade Your Way to Financial Freedom, noted author and trading consultant (and occasional blogger too) Van Tharp puts it this way:

“When I’ve had discussions about what’s important to trading, three areas typically come up: psychology, money management (i.e., position sizing), and system development. Most people emphasize system development and de-emphasize the other two topics. More sophisticated people suggest that all three aspects are important, but that psychology is the most important (about 60%), position sizing is the next most important (about 30%), and system development is the least important (about 10%).”

With this in mind, I was most interested to recently discover that Tharp had published an eight part series outlining some of his thoughts on personality types and trading. For those who may still be skeptical of the importance of psychology, before dismissing the articles, be sure to jump down to Part Eight, where Tharp talks about the Promethian Temperament. Tharp tosses out two statistics that I found particularly interesting:

  1. The Promethian Temperament (xNTx in Myers-Briggs speak) occurs in his sample trader population at a rate more than twenty times that of the general population; and
  2. “Among our NT traders, about 10% show outstanding trading records—a higher percentage than any of the other temperaments.”

Tharp goes on to explain that despite the fact that NT traders are handicapped by a strong desire to predict, control and explain the markets, they overcome this and are successful as a result of their insistence on acquiring more self-knowledge, continuously improving their craft, and applying as much science as possible to potential trading approaches.

If you are an NT, as I am, you probably know all of this already, but you might want to read the article closely to look for the shortcomings that NTs are prone to. If you are not an NT trader, consider how your Myers-Briggs personality type my help to accelerate and simplify the process of identifying your potential strengths and weaknesses as a trader.


Morning said...

Looks like the market is factoring in a 100% chance of 25bps cut in DEC. Would love to see some updated work you did on the VIX heading in the FOMC. I thought that was really good work.

Michael Lomker said...

I can't say that I'm surprised. I'm an INTJ and there is a lot about trading that the type can appreciate. I wonder if an ENTx would want to sit at a PC all day? I suppose that they become the brokers and us INTx's sit at home in front of a monitor. ;)

INTJ personality said...

It never ceases to amaze me the range of things I find people applying personality type to. I've been studying it a while now, but I hadn't come across its application to investing until now. But a lot of this makes sense.

I would also suggest thinking about how Enneagram applies. The 5 in Enneagram, which is what a lot of INTJs are, is even more specifically about compulsive need to know everything.

Thanks for opening my eyes to this angle on things. said...

rti found great blog here thanks
nice blog
very very nice
blog have written.
classified, blogs, backlinks, online games, forum, music website

Roberta said...

rti found great blog here thanks n i c e b l o g v e r y v e r y n i c e b l o g h a v e w r i t t e n . classified, blogs, backlinks, online games, forum, music website

Anonymous said...

Smithxpnx said...

rti found great blog here thanks n i c e b l o g v e r y v e r y n i c e b l o g h a v e w r i t t e n . classified, blogs, backlinks, online games, forum, music website

Ibeacons online said...

the protect case is quite crap, very thin, cannot provide the protection to it. Shopping on Amazon, I realized that Bow-flex made 3 folding treadmills-Ibeacons online

globo said...

This is such a great resource that you are providing and you give it away for free. I love seeing websites that understand the value of providing a quality resource for free. It is the old what goes around comes around

Watercolor Paintings said...

that one could not necessarily argue with the fact remains not necessarily universal, anything has the different. Thank you just for this facts.Watercolor Paintings

Tree Care said...

This market is constantly expanding and it is going to get even bigger in the following years. I would love to have this vehicle, I just want to know is this vehicle available in Tree Care

There is a Zen Saying in the customized, "Lack of Birth and way of life are the outstanding problem." That Is Where actual Buddhist Needs work out primary. said...

There is a Zen Saying in the customized, "Lack of Birth and way of life are the outstanding problem." That Is Where actual Buddhist Needs work out primary. Limousine services in Chicago

DISCLAIMER: "VIX®" is a trademark of Chicago Board Options Exchange, Incorporated. Chicago Board Options Exchange, Incorporated is not affiliated with this website or this website's owner's or operators. CBOE assumes no responsibility for the accuracy or completeness or any other aspect of any content posted on this website by its operator or any third party. All content on this site is provided for informational and entertainment purposes only and is not intended as advice to buy or sell any securities. Stocks are difficult to trade; options are even harder. When it comes to VIX derivatives, don't fall into the trap of thinking that just because you can ride a horse, you can ride an alligator. Please do your own homework and accept full responsibility for any investment decisions you make. No content on this site can be used for commercial purposes without the prior written permission of the author. Copyright © 2007-2013 Bill Luby. All rights reserved.
Web Analytics