Developing the Psychology of a Successful Trader

Trading has an appeal to people from all walks of life. Becoming a successful forex trader does not require advanced degrees in economics or business, and a large number of the most successful traders tend to be self taught.

Nevertheless, certain personality types seem to be better suited than others when it comes to the dynamics and stresses involved in trading. Basically, not everyone can feel comfortable putting their or other people’s money at risk on a daily basis, regardless of the potential returns.

Dr. Van K. Tharp — a prominent psychologist, author and trading coach — studied traders in depth. He determined that most traders tend to fit into particular personality types through which they define themselves as individuals.

Dr. Tharp coaches many professional traders and is one of the foremost authorities on the trading personality. His website offers a free online personality test to determine which psychological trading profile most closely fits your own personality.

Psychological Trader Profiles

The fifteen psychological trader profiles that Tharp identified — along with their respective probabilities of success — are listed below:

High Probability for Success

• Strategic Trader
• Planning Trader

Good Chance of Success with Some Work

• Detailed Trader
• Facilitative Trader
• Innovative Trader
• Spontaneous Trader
• Independent Trader
• Administrative Trader
• Values Driven Trader
• Socially Responsible Trader
• Accurate Trader
• Adventurous Trader

Possibility of Success with Hard Work

• Artistic Trader
• Fun Loving Trader
• Supportive Trader

Key Elements in the Successful Trading Psychology

The three key psychological elements that all great traders share, according to Dr. Tharp consist of:

1. The ability to see the big picture and to be able to make connections and to recognize new possibilities,

2. The ability to make decisions based on logic and analysis and

3. The ability to be orderly, decisive and be able to do things sequentially.

In addition, the one common thread that runs through each of the personalities which have the potential for successful trading consists of the ability to act in a practical, decisive and realistic manner when involved in a trading situation.

In essence, by cultivating and combining the best of the aforementioned traits identified as beneficial, the trader will tend to produce a personality which will then make the right trading decisions most of the time. 

Keeping a trading journal can also be a useful method for obtaining the necessary feedback from your trading activities to allow you to change for the better.

Successful Traders Devise a Plan and Stick to it

In terms of a brief recipe for success when trading, the successful trader will not only have a succinct and profitable trading plan, but will also need to cultivate the discipline to execute the trading plan as closely to their rules as possible.

If these two key things are not practical for some reason, then a trader probably needs to consider either changing their style or financing others to trade for them to achieve better results.