Trader personality types | MBTI profiles of traders

Have you ever wondered whether or not you'd make a good trader? It has become apparent that certain people are more suitable for this kind of activity than others. It has also become apparent that the most successful traders exhibit similar personality traits.

In trading, you may have guessed that those who are most likely to be successful tend to be the math and statistics types, and they also tend to enjoy similar recreational activities.

For example, many traders enjoy playing blackjack (the card game where you have to get as close to 21 as possible, without ever exceeding that number). Trading and blackjack features several similarities: the calculation of an expected value, making decisions based on imperfect information, understanding risk vs. reward, knowing when to bet, etc. You have to assess odds and make bets while weighing what you know and what the general consensus of others is.

Like horserace gambling, sports betting and blackjack, trading is also a game of odds. As a result, you need to understand probabilities as well as the concept of distribution for a whole range of possible outcomes.

What separates you from other traders?

Aside from identical twins, most of us are "wired" differently, which means that we tend to lean towards different types of professional and recreational pursuits.

MBTI personality test

Lastly, if you ever go on dating websites (such as Plenty of Fish) or dating apps such as Match.com, you might have noticed that many girls list their personality type (ex: INFP). Women love the Myers Briggs test as they believe it's a good way to determine compatibility between a man and a woman. (The INFP may be the toughest personality type for others to understand, though. They are seemingly easy-going and carefree, but when it comes to their core values, they can become suddenly uncompromising. They're friendly to a fault, but they frequently find others hard to be around!)

Myself, I've taken the test and discovered that I'm an ESTJ type. According to the Myers Briggs definitions, ESTJs are also referred to as "Executives", i.e. people with the Extraverted, Observant, Thinking, and Judging personality traits. "They possess great fortitude, emphatically following their own sensible judgment. They often serve as a stabilising force among others, able to offer solid direction amid adversity."

As you'll discover in the article below, E stands for extraverted, S stands for sensation, T stands for thought and J stands for judgment.

Some background on the test

The original versions of the MBTI were constructed by two American women, Katharine Cook Briggs and her daughter Isabel Briggs Myers. The MBTI is based on the conceptual theory proposed by Swiss psychiatrist Carl Jung, who had speculated that people experience the world using four principal psychological functions sensation, intuition, feeling, and thinking and that one of these four functions is dominant for a person most of the time.

Katharine Cook Briggs began her research into personality in 1917. Upon meeting her future son-in-law, she observed marked differences between his personality and that of other family members. Briggs embarked on a project of reading biographies, and subsequently developed a typology wherein she proposed four temperaments: meditative (or thoughtful), spontaneous, executive, and social.

After the English translation of Jung's book Psychological Types was published in 1923 (first published in German in 1921), she recognized that Jung's theory was similar to, but went far beyond, her own. Briggs's daughter, Isabel Briggs Myers, joined her mother's typological research and progressively took it over entirely.

Briggs and Myers began creating the indicator during World War II in the belief that a knowledge of personality preferences would help women entering the industrial workforce for the first time to identify the sort of war-time jobs that would be the most comfortable and effective for them.

Judgment (J) or Perception (P)

This describes how you handle your everyday life and your need for structure and order.

Traders with a judgment bias prefer to go through life in an orderly way. They prefer neatness over messiness, and control over chaos. If you have a judging preference in your personality profile, others may see you as decisive, responsive, scheduled, organised and someone who finishes tasks quickly and completely.

If you’re a "J" in the workplace, you might excel at making lists, blocking off time in your schedule to complete tasks, staying generally organised and performing decisive actions. For example, in an ad sales job, you may feel very comfortable closing deals. If you’re the media buyer in this transaction scenario, you might enjoy being the autonomous leader who decides what media to purchase.

A lot of people think that P types are disorganised or messy and that J types are clean and neat, however, the reality is that J or P dominance is no guarantee of either case. Both J and P types can be messy or disorganised. All the J or P letter at the end of your type means is that you show the world either your judging process or your perceiving process.

Another misconception is that the "J" for judging means "judgmental". J types are no more judgmental than P types; judging simply refers to the decision-making process, and whether or not that decision-making process is shown to the outside world. J types extravert their decisions (judgments) while P types introvert their decisions (judgments).

Perceiving personality types are relaxed. They cope with challenges by keeping an open schedule that allows them the flexibility to work at their own pace and change tasks as needed. In the workplace, people with a perceiving preference are adaptable and nonjudgmental. They are often happier learning a new skill or researching a topic than making a firm decision.

Recently, some have begun using the "P" to refer to the term "prospecting" rather than "perceiving". If you look up this preference, you’ll see the two words used interchangeably, as perceiving types are often autonomous creatives who generate new ideas.

If you’re a "P" in the workplace, people might describe you as warm, carefree, creative, adaptable, curious and flexible. In a museum job, for example, a perceiving personality might enjoy learning about new art exhibits and may respond well to last-minute changes in an event schedule.

In trading, having P or J dominance is not necessarily an advantage. J may be slightly more common among successful traders, but the two tend to be fairly balanced. Being the "judge" type is useful in trading, though, as it allows a trader to have a structure, a plan, and to be well disciplined and reliable.

However, "perceivor" types enjoy balance. They like to be flexible and prepared to adapt to spontaneous changes, such as sudden shifts in prices or market direction. Being able to see new trends is very helpful.

In the world of trading, neither P's nor J's dominate over the other.

Thought (T) or Feeling (F)

Thinking (T) as opposed to Feeling (F) describes how easily you make decisions but it also reflects your personal values. An analogy of this difference would be "mind versus heart". Do you tend to rely more on logic and reason, or are personal emotions or beliefs more important to you?

The primary difference between thinking judgments and feeling judgments is the nature of their criteria. As we will see, thinkers tend to use impersonal, logic-based criteria, while feelers consider tastes and feelings—both their own and others’—in making decisions.

Discussions between T's and F's can often turn sour because they process information in such a different manner.

As you probably already know, logical analytical skills are more useful in trading than "feelings", which can sometimes lead you to exit a trade too early (due to fear) or enter into a trade when certain specific criteria haven't quite been met (price hasn't broken above an RSI line, for example).

In trading, emotions are bad, and making decisions based on hunches and assumptions is dangerous for your trading account.

In sum, successful traders generally have Thought as the dominant trait.

Sensation vs Intuition

Introverted (I) vs. Extraverted (E)

The Introverted (as opposed to Extraverted) dimension helps describe how you manage your mental energy. This relates to:

- how easily you express your ideas and opinions, and
- how easily you introduce yourself to new people.

An easy way to understand the E vs. I difference is to envision yourself at a fun college party.

The key question to ask is not whether or not you want to be there and have a good time, but whether it energizes you to mingle and interact with others, or does it require that you put energy into it. If schmoozing in that kind of setting leaves you with more energy than you had before, that’s probably (but not always) a preference for Extraversion. If you have to expend energy to do it, that’s probably (but again, not always) a preference for Introversion.

Of course this is simplifying things, as even someone who strongly prefers Extraversion may feel drained by having to attend a party with people they dislike, or having to discuss a subject that they’re not even remotely interested in. But you get the general idea. Preferences for one or the other play out in an infinite number of ways, but a more frequently discussed aspect involves work settings.

Those falling under Extraversion, for example, like variety, interaction and brainstorming out loud and in groups. On the other hand, those falling under Introversion usually prefer quiet for concentration and developing ideas inside their heads before sharing them.

Knowing about preferences for Extraversion and Introversion (and knowing your own preference) can help you communicate better with family, friends and significant others. It can help you understand where you need to spend time during your day to make sure you’re not burning yourself out. It can help you manage and prevent stress, set and achieve goals, better focus your career plans, understand how you’re motivated and how you take action on that motivation, and more. And it all starts with self-awareness.

In terms of trading, some traders are introverts - they trade either using their own money or because it's their job, but they do so in an autonomous manner. However, some traders work as a team and make collective decisions where extraversion can be better rewarded.

With this in mind and as part of a team, it is important that everyone communicate in the most comfortable way possible. Introverts tend to prefer written communications (emails, etc.), while extroverts feel more comfortable with oral communications. Introverts are also less likely to be open to criticism than extroverts.

In any case, having either E or I dominance has little impact on trading profitability. And in the world of trading, neither E's nor I's dominate over the other.

NT-dominance is widespread among world-class traders

NTs only represent 9% of the general population, but they are especially prevalent among successful traders. They tend to see the big picture and anticipate market events long before they happen.

Ts tend to be rational and objective, and they use logical analysis in their decision criteria rather than personal feelings, emotions, hunches and judgments.

However, a trader's penchant for introversion over extroversion or vice versa is not considered very important. Also, it is usually best for traders to strike a balance between their perception and their judgment.

Approximations and conceptual analysis in trading

Traders need to understand approximations when observing the market. This is especially true as trading involves both probabilities and distributions of potential results. They need to accept that unknown variables are going to be important in relation to what they know.

It is generally not a good idea to focus too much on precision or to make premature judgments about certainty (rather than seeing the future as a distribution of outcomes with associated probabilities). As a trader, you need to be good at conceptual thinking.

For example, when most people need to multiply large numbers in their head without a calculator - for example, 629 and 98 - they will tend to make a mistake and be way off rather than just rounding the 629 to 630 and the 98 to 100 and coming up with an approximate figure like 63,000.

There is a certain level at which you need to understand most things in order to make an effective decision.

Trading has a lot to do with the big picture and the way things work as a whole. Unfortunately, though, when some people point out certain exceptions, it is likely that they are digging too deep into details and losing sight of the big picture.

When conflicts arise between the various personality types

When two people disagree on something, this is usually because they each have a different way of thinking.

Some people put the blame on poor communication skills. In reality, it is often the opposite: disparities in their thinking.

In the world of trading and investing, decisions are often taken as part of a team. It is important to keep in mind people's differences and their individual level of credibility and knowledge when making collective trading or investment decisions. Also, be careful of the weight you attach to a person's opinion, as they're like belly buttons - everyone has one! So you have to know who the right people are to lead a given trading or investment decision.

Have they been continuously successful in trading the gold market, for example, and do they have a deep understanding of the cause-effect relationships that relate to their conclusions?

It is key that you understand people's differences and know how this will affect the decisions they'll make.

MBTI profiles

Is the Myers-Briggs test a one-stop assessment tool?

There are many other ways to assess a trader's personality - or a person's suitability for trading.

The Myers-Briggs personality test is one of many ways to assess an individual's way of interpreting the world and gives a rough idea of how you or other individuals are "wired", but it shouldn't be seen as an all-encompasing measurement tool.

Other trader personality assessment methods

Instead of just looking to assess a trader's personality, it may simply be better to assess his or her performance.

These are some of the most basic metrics or parameters that will help you gauge the performance of your trades and will help you identify the weaknesses and strengths in your trading.

Some widely used metrics are:

  1. Annualized Return: The yearly average % Profit(or Loss) from your trading strategy
  2. Annualized Volatility: The standard deviation of daily returns of the model in a year. Volatility is used as a measure of risk, therefore higher vol implies riskier model.
  3. Sharpe Ratio: The reward/risk ratio or risk adjusted returns of the strategy, calculated as Annualized Return/Annualized Volatility
  4. Sortino Ratio: Returns adjusted for downside risk, calculated as Annualized Return/Annualized Volatility of Negative Returns
  5. Max Drawdown: Largest drop in Pnl or maximum negative difference in total portfolio value. It is calculated as the maximum high to subsequent low difference before a new high is reached.
  6. Win/Loss, Average Profit/Loss: Sum(or Avergae) of Profits from trades that results in profits/Sum(or Average) of losses from trades that results in losses
  7. % Profitability = % of total trades that resulted in profits

 

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