Trading is a mind game, quite often it’s a psychological battle going on in your own head. So, one of the most crucial qualities a good trader must have is to know his strengths&weaknesses. Then he should do two more things: Try to improve of course, and try to find a trading style that fits these strengths and weaknesses.

I’m proud to say that I am very good at identifying these and coming up with a trading style that is suitable. As a case study, I’ll lay them out here and maybe you can do yours and learn from yourself.

Negatives:

- I’m very impatient as a person. Want to see immediate results.

- I’m not very good or experienced with fundamental analysis. I can read a basic balance sheet of course but not much more.

- If I see something moving big that doesn’t make sense to me, I’m hesitant to join. I’m inherently short biased in these cases. However, market doesn’t always have to make sense and there’s lots of money to be made by being irrational.

Positives:

- I have a very good sense of traders sentiment, my timing is usually very good as I can get ahead of the crowd

- I can isolate myself from greed or fear of the crowds and look at conditions objectively.

- I don’t employ hope or luck in trading, if I start losing on a trade, I can run away fast without letting it grow. I have good risk management.

- I don’t get cocky or desperate in case of quick wins or losses.

If you don’t already know my main trading style, I’ll briefly say that it’s about short term reversals of overextended situations. Shortly, if a stock is up 80%, I’ll be sniffing a short before anyone else. Very risky, but very lucrative if done right.

Now when you look at my strengths & weaknesses, isn’t this a perfect fit for my personality? My weaknesses aren’t too much of an issue in this type of trading and my strengths really shine.

How long could I survive as a buy&hold trader? Not long. Well, actually I used to be one and I was almost wiped out completely. You don’t come up with these things without losing first. But now I’m doing just fine because what I do fits what I am.

My point is, we need to embrace our weaknesses and come up with a system that is affected least by them. I see too many people trading one way but not employ the requirements of that trading style due to their weaknesses.

Happy holidays everyone.