The kind of trader you are will affect — or should affect — your trading strategy. It helps to know your trader type so you can trade effectively and in a way that feels right for you. To determine your trader type, take the following quiz.
The quiz
Which statement best describes you when you're competing?
A. I'm aggressive, outgoing, and confident in my abilities whether I win or lose.
B. I like to be perceived as wise and thoughtful, and I accept loss as part of the process.
C. I'm calculating, and winning is extremely important to me.
In your free time, what do you most enjoy doing?
A. Action-packed activities with high-adrenaline energy and risk
B. Activities planned in advance, and ideally ones that further my knowledge or experience in some way
C. A wide variety of fun activities, depending on what opportunities emerge that day
If you were given $250, which of the following would you do with the money?
A. Gamble it on a good bet and try to win big.
B. Spend it with a night on the town, shopping, and dinner.
C. Save and invest the money for a rainy day.
Your favorite sports team is significantly behind at the halfway point of the game, what should the coach do?
A. Trust the team's preparation and original game plan, and the tide will turn in their favor in the second half.
B. Draw up a new strategy to take advantage of a weakness observed in the first half.
C. Take a risk by trashing the old strategy and shifting to a more aggressive attack mode to get back in the game.
At work, if you completed a project well ahead of your scheduled deadline, what would you do with the extra free time?
A. Submit the project and ask for another.
B. Pore over the project even further to dissect it, making subtle tweaks, but keeping the project much the same; then turn it in on time.
C. Do more research to see if you can add on to the project even further.
In a party setting, which of the following descriptions is most like you?
A. Energetic, rapidly flitting between conversations if you get bored
B. Generally sitting with two or three close acquaintances, learning about what's new with them
C. The center of attention, happy as long as you're surrounded by peers
Which of the following workplace careers would you most like?
A. A long, successful career as an average employee who does a good job, gets paid well, and retires comfortably, while never rocking the boat or ascending to a position of power.
B. A successful worker who often rises to management positions but is labeled as a "job jumper" who has many stints at a variety of business ventures.
C. A short stint as a CEO of a well-known company that was initially successful and enriching, but eventually succumbed to outsized expectations, followed by an average career thereafter
How do you typically trade an event like nonfarm payrolls (NFP) in the United States?
A. Form an opinion, place your trade, and hang on!
B. Wait for the overzealous reactions directly after the announcement and trade the aftermath.
C. Trade NFP? Are you nuts?
The results
Tally up the number of A's, B's, and C's in your responses. If you mostly answered A, you're a scalper. If you mostly answered B, you're a swing trader. If you mostly answered C, you're a position trader. Read on to learn more.
The scalper: A scalper is a trader who looks for short, minimally profitable opportunities in the market that can add up over time. If you're a scalper, you don't have the patience to hold a position for a lengthy period and you grow bored easily when keeping trades active for too long. You're motivated by the excitement of seeing fast-moving markets, sometimes trading around major news events to realize the vast potential of a large move in a very short period of time. You aren't happy about placing a losing trade, but you're typically less impacted both financially and emotionally due to the small nature and frequency of trades that you place.
The swing trader: A swing trader is someone who typically enjoys staying in a trade for as little as a few hours to potentially days. If you're a swing trader, you like the analysis aspect of trading — finding patterns that develop and exploiting them like a cunning strategist. Because you place fewer trades on a daily and weekly basis, losing trades could have more of an impact on your psyche, so keeping your longer-term goals in mind and sticking to the plan are imperative.
The position trader: A position trader has a much longer time frame in mind than most other traders. If you're a position trader, you could be in a trade for months or even years if your conviction is strong enough. Usually based on a fundamental perspective of political, sentimental, or supply/demand reasoning, you brush off the fear of short-term movements. You're much more tolerant of drawdowns and could take losses for a very long time before finally admitting defeat.