Find the Setups That Fit Your Personality

“My style on the chessboard was a direct expression of my personality.”

And then:

“I believe that one of the most critical factors in the transition to becoming a conscious high performer is the degree to which your relationship to your pursuit stays in harmony with your unique disposition.”

Order The PlayBook

These quotes are from The Art of Learning: An Inner Journey to Optimal Performance by Josh Waitzkin, former chess and presently martial arts champion. We can learn from Josh’s lessons as an elite performer as traders. How do we find a trading style that fits our personality?

In One Good Trade I wrote about Mad Max who craved momentum stocks. Mad Max was a former elite wrestler and all-around lover of things aggressive. Aggressive individuals may find they enjoy trading momentum set ups. They should find more of them. But they must also recognize their limitations due to their disposition. They must learn which momentum set ups offer excellent risk/reward opportunities for them and which offer too much risk for the potential upside.

One of our senior traders loves to measure his trades. He doesn’t believe in a trade unless he can understand its probability of success. Well, trading does not quite work like this all the time. Each trade requires an understanding of the present psychology of the marketplace. The trade that he thinks he can measure the probability of may be based from markets with different psychology. Sometimes you just have to be able to play and love the chaos (think 2008, 1998, 2007, 1999, 2000). So this trader should crush the trades he can measure but accept that things don’t always make sense and adapt in these unique markets.

Another of our senior traders is ultra laid back. He likes for his plays to develop. He trades them with size but he prefers the slow movers. Forcing him to trade momentum would make no sense. He should focus on his best set ups that match his personality, trade more of them, and work to trade them with more size.

One of our former traders was always the smartest guy in the room. He loved fading stocks. This fit with his superior intellect. He was smarter than most in the market thus fading outsized moves. The problem was he only faded. He faded everything and was unable to pass on the super strong and weak stocks which should not be faded. They are unlikely to reverse. He was unable to focus mostly on fading but understand that his personality was causing him to overfade.

We have had traders move to hedge funds because intraday trading was not intellectual enough for them. This was the right move for their personality.

I come from a very stable, safe, responsible home where I was unconditionally loved. I like order. I tend to be able to trade just about any set up but I can struggle with taking on too little risk. So for me I must always be careful to add risk to my positions when appropriate.

Also, I most enjoy helping others. When I play basketball I would rather pass than shoot. And thus it is best for me to use my talents as a trading teacher than as a trader.

We’re all different. We must understand our natural disposition. Then we should consider how our personality impacts our trading. We should find the plays that match our personality and then focus on trading more of them. We should understand the limitations our natural disposition imposes on our trading and find solutions to improve.

One last note for developing traders. You must first build a solid foundation. Learn and experiment with many different set ups. Then you can gravitate towards the plays that fit your personality.

You can be better tomorrow than you are today!

Mike Bellafiore

One Good Trade

The PlayBook

no relevant positions

17 Comments on “Find the Setups That Fit Your Personality”

  1. “A genius is the one most like himself.” – Thelonious Monk

    Thanks for the post I found it very helpful. I spend quite a bit of time backtesting new trade set-ups using Tradestation yet my trading results suggest I’m most effective (and comfortable) trading simple breakouts.

  2. I don’t think that stock fader you described is the smartest guy in the room, unless he had serious programming and statistical skills to keep the edge.

  3. Good article. By the way, I read your book, it’s good..fat (PHAT) too. In both ways. I don’t like “How to” books, and it was refreshing to find out that yours wasn’t like this. It was original because it tells more about the personalities and why they were — and weren’t — successful at trading. Maybe successful traders are good not only at adopting the trading method that is right for their personality, but also, and maybe more so… learning how to use their personality in the right way to begin with, this then lead to finding the right way to trade.

    P.S.- I did take your book back, but that’s only because I’m on a tight budget and I’m using Barnes and Noble as my library card. But good news, I was back at the store and realized someone had already snatched it up. Hotcakes… flying off the shelf. I do recommend it. Your book, hotcakes, shelves… and Barnes & Noble. And hopefully no one at B&N is reading this and takes away the 14-day money-back book guarantee.

  4. Right on the money as usual Bella. I have just subscribed to a trading service ( trader tweets his trades) and the style does not suit me at all..very high risk and trades that don’t make sense to me. 1 week into it and I realise that it does not work for my personality..and that is the key factor. Thanks for the great post.

  5. Love the insights Mike. I’ve found it takes a bit of time experimenting with different strategies and trading styles before finding the one best tailor made for my personality.

  6. find the personallity to trade is a challenge (the definition of personality is: “the set of psychological characteristics that determine the patterns of thinking, feeling and acting, ie, individuality and personal social someone). I believe that the first skill is the discipline, if the personality was indisciplined, will be quite difficult to be consistent. I believe that the foundation is a critical part of all process, and can’t imagine someone being susseful without know him self before.

  7. Great point. First you need to build a foundation as a trader. Then you can gravitate towards the plays that best fit your personality. Thxs for sharing.

  8. Mr. Bellafiore, How can I be proficient in all styles so that I may adapt to the market conditions? Is it possible to be formless? I read that you enjoy all set ups. Do you recommend ripping through charts, and practicing all the different set ups on the simulator?

    Sincerely, EricT

  9. At first you need to build a foundation. You need exposure to many different types of set ups so you can get a sense of which are best FOR YOU. A simulator is a great place for this.

Leave a Reply