Trader Personality Types | Who Best Succeeds at Trading?

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Trader Personality Types | Who Best Succeeds at Trading?

If you’re considering whether trading is a good pursuit for yourself, good for others (e.g., hiring), or what makes a good trader more generally, we know that some personality types are more attracted to some professions over others. We also know that trader personality types also follow a common thread.

If you think of who tends to pursue what, they generally have similar kinds of personalities. Someone who is heavily into literature or theater tends to be quite different than someone who pursues mathematics, physics, or engineering.

In the trading realm, you may notice that the ones who are most likely to succeed tend to be more mathematically and statistically oriented and are often into similar types of “games”.

For example, many traders tend to be into poker.

Trading and poker have many similarities – understanding risk versus reward, making decisions under imperfect information, knowing when to bet and (more importantly) when not to bet, making expected value calculations, and so on.

Sports betting is another game that has many similarities to trading.

You have to assess odds and make bets by understanding what’s already discounted and having a unique view relative to the consensus (and being right).

Trading – like poker, sports betting, blackjack/card counting, and others – are games of chance and probabilities.

During the Covid-19 crisis sports were largely shutdown globally (i.e., no betting markets) and casinos were closed. Many people were stuck in their homes as part of the distancing process. Moreover, many brokerage products and services are now commission-free.

A lot of that flow went into day trading.

Trading attracts a lot of the same types of personalities and individuals.

You have to understand probabilities, expected values, and the concept of distributions and likelihoods across a range of possible outcomes.

Differences between individuals

Everybody is “wired” very differently and that makes them suitable for different types of pursuits and roles within them.

Even within an investment management firm, who does best in what role is going to vary wildly.

Someone on the investment side is likely to be quite different from someone in client services, who in turn is going to be different from someone in sales and marketing, admin, risk management, and so on.

Even within a division (e.g., trading/investing), there are going to be differences between who’s good at what.

Some people may have a subject matter expertise (e.g., oil, equities, credit, rates) or a specific way of thinking.

Others might have a good grasp of the big picture and are effective in communicating it. But they may not be as strong in turning those ideas into effective trades and how to structure them well to maximize reward to risk and how it fits in with the rest of the portfolio.

Others are the opposite and see the details but are not quite as good with the “vision” or the big picture.

What’s most important is to understand your nature and operate consistently with it. Thinking styles influence how different people handle different situations.

 

Trader Personality Types under a Myers-Briggs (MBTI) Framework

The Myers-Briggs Type Indicator (MBTI) is a self-questionnaire that helps shed insight into how people manage their energy, how they process information, approach their decision-making, manage their lives, how they perceive the world, and even their values.

It scores people across four continuums based on their answers: introversion (I) or extraversion (E), sensing (S) or intuition (N), thinking (T) or feeling (F), and judging (J) or perceiving (P).

Each individual tends to have a preference or dominant function in each of the categories. That gives them a certain four-letter personality type based on the MBTI framework.

For example, ENTJ is a personality type that will tend to describe someone who is extroverted, more big picture in their thinking, prefers rational objectivity over feelings and personal judgments when making decisions, and tends to prefer order and structured environments.

ISFP would represent a different type of personality that is more introverted, more focused on details, prefers making decisions based on “gut feeling” or instincts, and prefers less structured environments and may be more creative.

Like in many professions and those who gravitate toward certain pursuits, traders will tend to have a common type in terms of their preferences for thinking and action.

We’ll go through each of the four category continuums below. At the end of each section, we’ll describe what dominant function within each is best suited to success in the trading profession.

 

Introversion (I) vs. Extraversion (E)

This Introversion vs. Extraversion dimension helps to describe how you manage your energy.

Your preference for either Introversion or Extraversion pertains to matters like:

– how easily or openly you express yourself

– how readily you socialize with new people, and

– the means by which you engage with the world around you

Most fundamentally, the dimension often relates to whether you are more energized by time alone or by time around other people.

Someone who is dominant in Introversion will be primarily focused internally, on their own thoughts, ideas, memories, and experiences.

Most of the time, an Introvert will find it more appealing to be in quiet, peaceful surroundings than to be surrounded by large groups of people.

They tend to be more reserved and more likely to keep their thoughts inward.

An Extraversion dominant individual will tend to be more externally focused. They will socialize more readily and will more openly seek and feel energized by the company of other people and are more likely to seek out the thoughts of others.

Someone who likes to “talk out” ideas is probably Extraversion dominant.

On the other hand, an Introvert is more likely to prefer to think privately and share only when they’ve worked things out on their own.

Trading can often be a very solitary thing. But it can also be a very communal thing as well, depending on the context.

Some traders are Introverts – either trading their personal account or as part of a firm but with a lot of autonomy.

Some traders work as part of a team and make decisions collectively where Extraversion may be more rewarded.

Keeping this in mind as part of team settings, it’s important to help each communicate in a way they feel most comfortable.

Introverts tend to prefer their communications in writing (e.g., email) whereas Extroverts will tend to feel more comfortable speaking in group settings.

Introverts are also more likely to be less open with critical thoughts than Extroverts.

Either way, having either E or I dominance has little to do with success in trading.

Trader dominant trait: Neither

 

Sensing (S) vs. Intuition (N)

This dimension describes how you process information.

Your preference for Sensing or Intuition describes whether your style of thinking is straightforward and concrete, or more creative and abstract.

Sensors and Intuitives tend to have a preference for different kinds of information.

Sensors are more interested in specifics and details; Intuitives are more interested in ideas and conceptual thinking.

Sensors are more likely to be interested in precision; Intuitives are more interested in approximations.

To use the old analogy, some are better at seeing the forest (Intuitives) while others are better at seeing the trees (Sensing).

An Intuitive is primarily interested in ideas and possibilities. An Intuitive is more likely to be bored or uninterested with mundane details. They will prefer to look at the big picture and understand how everything works together.

Intuitives are more drawn to ideas and theories, and enjoy imagining the future. They will more naturally see patterns and connections about things. They think of context first and details later.

Sensors tend to have better attention to detail and a focus on “what is”.

You can find out what people’s preferences are by understanding what they focus on.

In general, some people are focused on daily tasks while others are focused on broader goals and how to achieve them.

Sensing types tend to be better with details and tasks while Intuitive types tend to focus on goals and visualizing big pictures over time.

Intuitive types are also more likely to be effective traders because they are more likely to anticipate future changes and events, which is a key aspect of the profession.

In general, Intuitive individuals are most suitable for roles that involve lots of change. So, they are often better at creating new projects and organizations and also managing organizations that have a lot of change.

In trading, putting on trades and dealing with functions like risk management, accounting and admin, and completing the essential tasks are all important. But a big part of the decision-making aspect is that things are always changing.

It’s important to have a broad view and see the whole picture as best as possible, and work with or learn from capable others to get at their thinking.

Sensing individuals are better at focusing on daily tasks and managing things that don’t change much or require processes to be completed in a reliable way. They tend to be more surprised by sudden events or departures from the status quo.

But Sensing types tend to be more reliable than Intuitive individuals.

Even though the focus of Sensing individuals tends to be narrower than those who think more broadly, the roles each play are both critical.

Intuitive individuals might be more effective at generating trade ideas and envisioning possibilities.

But it takes a certain amount of detail to actually form these into realistic trade structures and also manage the risk well, which falls more toward what Sensors do well.

Trade construction takes skills and abilities that draw from both big picture thinking and nailing down details. How certain trades or themes fit into the broader portfolio is closer to the Intuitive part of the spectrum.

Sensing types might be more effective at the tasks that require reliable execution – e.g., trade execution, risk management – which are very important, but may be less inclined to see what the big thematic or strategic trades might be.

Most good traders have a preference for Intuitive (N) over Sensing (S), though each play an important role.

Trader dominant trait: Moderate Intuitive (N) preference

 

Feeling (F) vs. Thinking (T)

Feeling (F) versus Thinking (T) describes your orientation to decision-making and is in some ways a reflection of your personal values.

Some might call the preference for Thinking or Feeling a preference for “head versus heart” in your decision making.

This preference relates to how you prioritize conflicting values.

Do you tend to feel more comfortable relying on logic and reason, or do you prioritize emotions, feelings, hunches (“gut feeling”), personal judgments, and how something makes you, someone else, or group as a whole feel?

If you are a T type, you are more driven by a desire to pursue a logical analysis of objective facts, considering all the known and provable factors related and important to a given situation and using reasoning to determine the best course of action.

A T type will tend to think about things in a detached and unemotional way. They are most comfortable reasoning through an issue logically, preferring decisions to be as objective as possible.

This means you will be inclined to be competitive with others, and will put achieving your own goals first.

An F type will be more interested or swayed by personal appeals. They will focus more on harmony between people.

They are better suited to roles that require empathy, relationship building, and interpersonal contact. Human resources (HR) and customer service are common roles for those who exhibit an F preference.

Conversations between T’s and F’s can often be particularly frustrating because their ways of thinking are so different.

As you might imagine, in trading, there is a very strong preference for Thinking over Feeling.

In trading, emotions are harmful and decision-making based on hunches, feelings, half-baked assumptions, and opinions and ideas that have not been well stressed-tested is worse than useless.

Accordingly, successful traders typically have Thinking as their most dominant trait of the four Myers-Briggs dichotomies, and normally score very low on Feeling.

Trader dominant trait: Strong Thinking (T) preference

 

Perceiving (P) vs. Judging (J)

The Perceiving vs. Judging dimension of personality describes how you manage your life and preferences for structure and order.

Your preference for Perceiving vs. Judging broadly describes your orientation toward structure, scheduling, deadlines, and overall organization.

It also strongly relates to how you tend to manage your time and the approach you take to the work you have to do.

A Judger (sometimes called a “planner”) is someone who is more structured, planned, and orderly. They like to schedule things and dislike spontaneous changes. They tend to prefer structured environments and consider themselves reliable and responsible.

They have a plan and like to stick with it.

A Perceiver is more flexible and spontaneous. They are more likely to focus on what’s happening around them and adapt to it.

Perceivers see things externally and work their way internally. In other words, they see what’s happening and work backward to understand the causes and how to respond. They see possibilities that they compare and choose from.

Judgers see things internally and work their way externally. They first figure out what they want to achieve and then how things should appear and be built out in the external world.

Though there are often frustrating conflicts between Thinkers and Feelers, you will also see disagreement between Perceivers and Judgers as well.

Perceivers see new things and will be inclined to change direction in light of this.

Judgers don’t like this, as they will tend to weigh precedent more heavily. If something was done a certain way before, they will tend to believe that it should be done the same way that produced those results (or at least feel more comfortable doing it that way).

Moreover, Judgers may also discomfort Perceivers by being seemingly rigid and slow to adapt.

In trading, having either P or J dominance is not necessarily an advantage. J may be slightly more common among successful traders, but they tend to be fairly balanced.

Being a Judging type has its usefulness in trading in terms of having structure, having a plan, being well-disciplined, and being reliable.

However, being balanced with Perceiving is useful. Having flexibility and being willing to adapt to spontaneous changes is important. Being able to see new things and possibilities is valuable as well.

Trader dominant trait: Balance between Perceiving (P) and Judging (J)

 

NT dominance is common among successful traders

NT is about only 10 percent of the population. But NT dominance takes up a large part of those who are successful at trading.

N’s tend to see the big picture and anticipate events and possibilities before they happen.

T’s prefer to use rational objectivity and logical analysis in their decision-making criteria rather than feelings, emotions, gut feeling, and personal judgments.

Preference for Introversion over Extraversion or vice versa is not particularly important.

And generally, it is helpful for traders to be balanced with both Perceiving (adapting, seeing new approaches) and Judging (planning, structure, reliability) on the continuum.

 

Approximations and conceptual thinking in trading

Traders need to understand approximations and be good at them. Trading is a game of probabilities and distributions of potential outcomes.

Many people struggle with uncertainty. Traders have to embrace that the unknowns are going to be large relative to whatever they know and can be reasonably known.

Getting hung up on precision, viewing things narrowly, making premature judgments of certitude (rather than viewing the future as a distribution of outcomes with probabilities associated with them), and engaging in black-and-white thinking is typically not appropriate.

Traders must be good at conceptual thinking.

For example, when most people need to multiply two numbers together on the spot in their head – e.g., 628 and 109 – they will tend to get bogged down, not figure it out, or make a mistake and be very off rather than just rounding the 628 up to 650 and rounding the 109 down to 100 and offering an approximation of 65,000.

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

Of course, it depends on the nature of the decision – i.e., what kind of decision, how much time you have, the downside relative to the upside, how easy the decision is to change without penalty, the marginal gains of spending time on it relative to the marginal gains of spending time on other things.

Trading has a lot to do with the big picture and how things work in a “by and large” sense.

When people point out certain exceptions, then what’s likely to transpire is digging into details and possibly losing sight of the big picture.

 

Disagreements between personality types

People’s disagreements often stem from their differences in thinking.

Some people attribute it to ineffective communication. In reality, it’s often the opposite. The disparities in their thinking cause their communication problems.

In trading and investing, decisions will often be made on a collective basis in an institutional setting. It’s important to keep people’s differences in mind and their individual levels of credibility and informedness when making decisions.

It doesn’t make sense to treat everyone’s opinions equally on (say) the oil market (or any subject matter) when there will be stark differences in their relative levels of believability.

Opinions are a dime a dozen. You have to get at who the right people are for whatever you’re trying to understand.

Have they successfully accomplished the thing in question multiple times and do they have a great understanding of the cause-effect relationships governing their conclusions?

Knowing people’s differences and how that makes them suited to making different types of decisions is critical.

E vs. I

E will be more comfortable discussing ideas openly while these types of conversations will generally be painful for those who are I dominant.

In meeting settings, E’s will tend to be more dominant, so certain checks may need to be made to ensure that someone has enough time to communicate their thinking without worrying about not being understood or being drowned out by someone else before they can finish their thoughts.

Likewise, each will tend to prefer different communication styles.

E’s will typically prefer in-person face-to-face or group discussions while I’s will generally prefer hashing out their ideas and points in writing as a better way to crystallize their thinking and ensure that it’s communicated effectively and is fairly complete.

S vs. N

N’s will tend to fault S’s by being overly focused on details and not seeing the big picture.

S’s may think N’s are too impractical and not appropriately in tune with the “here and now” and important details that can make a big difference in processes and outcomes.

F vs. T

Some of the biggest disagreements between people have has to do with how they make decisions and their overall decision-making criteria.

Does one prefer to use logical analysis of objective facts to make the best decision, or does one prefer to use gut feelings, personal judgments, how decisions might make themselves or others feel, and prize harmony between people?

They are very different from each other and F’s and T’s are generally suited to different types of roles.

P vs. J

P’s may see J’s as overly inflexible and too slow to adapt to changing conditions or too hung up on precedent.

J’s may see P’s as not orderly enough, not sufficiently focused on having structure and deadlines, and too likely to want to disrupt plans and change things midstream.

 

Final Thoughts

Trader personality types tend to follow certain themes. Personality types by department within a trading and investing business also follow certain patterns.

Those who are good at coming up with big picture views and thematic trade ideas tend to very N dominant and T dominant.

Those who are good at turning big picture views and strategic ideas into trades tend to also be N dominant but with more attention to detail (i.e., score higher on S) and are also T dominant.

Those who are good at managing risk are often S and T dominant.

Admin, accounting, and legal tend to also be more S and T dominant (though T dominance is not as important).

Client services and customer service where higher levels of empathy are needed tend to see more F dominance.

Salespeople and customer service representatives score higher on E than I, though such a preference isn’t particularly important on the trading and investing side.

P and J preference also isn’t as important for trading and it is helpful to be balanced in both.

The ability to see outside-in (i.e., Perceiving) from seeing the world around you connect the dots and adapt to change is valuable. The same goes for the ability to work from inside-out (i.e., Judging) from having an idea and building it out.

Beyond Myers-Briggs

Of course, there are many different ways to measure someone’s personality and other psychometric traits.

The Myers-Briggs Type Indicator is simply one option and can represent a data point in understanding yourself and/or others and should not be emphasized any more than appropriate.