I thought I would start this thread to discuss abnormal psychology and how it could relate to trading. Since it is a well known fact that the class of those who make money in the market are a minority, it would seem that these individuals possess a way of thinking that is different from most people. What better place to look for different thinking than the "abnormal". In this thread I would be interested to hear from people who themselves have diagnosed (or strongly suspected) abnormal psychology and how it relates to trading. Also from psychologists and their thoughts on this topic (or corrections in case I posted some inaccurate information). Many people automatically assume that disorders such as Aspergers, ADHD, Schizophrenia (or others) are found in people who have an inferior ability to deal with reality. While in some cases this may be true, traits from these disorders can give rise to some truly amazing people (im not going to list them there are many of them if you are willing to do a search). Take for instance here on ET an individual named Acrary who has stated that he has ADD. All you have to do is read the first 10 pages of this thread to tell that on a usefullness of posts scale he would score in the upper 99.9th percent http://elitetrader.com/vb/showthread.php?s=&threadid=33654&perpage=6&pagenumber=1 Altho the theme of ADHD is that of an inability to do one thing for very long, individuals sometimes have the ability to hyperfocus on one subject. Aspergers also has some characteristics that would be desirable in trading such as strict adherance to routines and activities that are restricted and repetitive and are sometimes abnormally intense or focused. Schizophrenia is complex and can manifest itself it different ways but a general theme is that there is a loosening of associations between concepts which can unfortunately lead to psychosis but also increased creativity and ability to put things togther in strange ways. Edit: in anticipation of jokes to come I would like to state that schizophrenia has nothing to do with multiple personalities.
Asperger's. MPD. Bipolar disorder. But not in all personalities. Early onset Alzheimer's. Again, not in all personalities. And a little OCD, but that's a good thing in a systematic trader. As is antisocial personality disorder, makes you a better shorter. Acute panic disorder keeps you in the house glued to the tube 24/7 like you should be. As they say in NLP: "What can you do with a problem like that?" All in all, borderline personality disorder seems to be a very nice diagnosis of personality and prognosis for success as a trader.
I'm over into the Aspergers a little bit and when I take online tests I'm over into Psychotic a little bit too... I could care less about that really.. I would say that the number one personality characteristic for trading would be thoroughness.... same for engineering which is what I did before...
On the Trader Myers-Briggs Personality Type thread of the 48 people who give their type 22 are INTJs according to my count. If memory serves INTJs make up about 3 or 4% of the population as a whole so this is quite a remarkable result. According to Myers-Briggs theory then it may simply be a question of how people relate to the world, ideas, other people and so on rather than anything more extreme that determines their success in trading. Of course it could be that INTJs are the type of people who like taking questionnaires and reading forums. Who am I, an INTJ, to say?
This may be a bit off topic...but for quite some time I have been trying to figure out how successful traders think. Hopefully what I say will be helpful to some, and I look forward to learning something new. I don't feel like organizing this, so I'll kind of blurt it out. First and foremost, I think a good trader must be professional. Either you are in this business to make the money, or you should not be in this business. That alone is hard (believe it or not) for some to overcome. I also think that a trader must be similar in many ways to a professional athlete. This is more specific to day traders, but I think it can apply to any type of trader as well. You obviously must be able to focus intently under pressure, be able to make decisions, and do it in a manner that is consistent with your goals (to make money). I like to think of it in terms of golf. I'm not much of a golfer, but when I played most recently I found that my golf game is similar to my trading game. Some excellent shots, followed by a mix of complete flops or average shots. The last thing I'd like to mention refers to the "survival personality." I read the book "Deep Survival" and the parallels to trading (or at least day trading) were immense. So that is what I think about the psychology of trading. As far as ADHD goes, I don't think most of the people I know with ADHD would be very good candidates for this business. That's just what I know though. I really think that it just takes a cool head among some other traits. Hard work, discipline, and confidence may be a few. Hope that this generates a few good responses.
Yup, its like saying rich people have long index fingers... some kind of absurd 1800s line of thinking.
It isn't all that complicated. Think about the housing market for a moment. It can be categorized as a buyers or a sellers market. When supply is high, like it is now, buyers have the upper hand. They can bargain for prices. When supply is low the opposite is true. Why don't people use that view when the stock market, or futures market is concerned. For some perculiar reason people become sheep when they enter the stock market. They look for strength, momentum, breakouts, etc....when what they should be doing is quite the opposite. They should be looking for sharp sell-offs, break downs, downward momentum, etc...before they buy. I day trade the futures market (the ES) and my best win trigger is the one that is pointing straight down. I mean I literally try to pick the exact bottom if I can. When I miss I hit the thing harder, and harder, and harder until I get it right. It becomes a ruthless pursuit. When I get in a trade like this it's all out war, especially when I butcher the first couple of entries. The fear of losing disappears when you get into a hole. The pain you are feeling can't get any greater so your fight or fligh hormones start kicking in. It becomes a raging war to win. This is how a successful day trader thinks --->>> It's just an all out battle that cannot be lost at all costs. The strikes are precise and have been rehersed, and, most importantly, to be successful, a day trader must never pick a fight he cannot win, or at least one where he doesn't have a high probability of winning. The question: Can you buy something that is pointing straight down or sell something that is pointing straight up? Most people can't. Very few people can pick a bottom and when they try and get it wrong they immediately panic. Drawdowns on trades are a necessary evil. Every battle will cost you some soldiers and blood will be shed. Only fight a battle when the odds are heavily in your favor and be ready to fight the fight of your life if your opponent is tougher than you thought he was.
I would have thought that being able to ignore propaganda you don't agree with would be a major success factor. Also objectivity, read a web board of a stock that has declined and you will understand people believe what they want to believe - if the flock just reassures each other enough the stock will go back to breakeven.
Abnormal psychology and trading: Aspergers ADHD Schizophrenia This is veiled plot to dumb down the 7, 63 test to let people with clinical diagnosis and the disabled, entry level jobs to GS.