Who knew this would turn out to be a telling question for traders to ask themselves? When I was recently reading Susan Cain's Quiet, The Power of Introverts in a World That Can't Stop Talking
, I stumbled across a section that tied trading behaviors with introversion and extroversion.
Cain goes to great lengths to explain that all introverts possess some characteristics of extroverts and vice versa. She wouldn't want me or others to generalize too much from her research and conclusions. However, she notes some differences in trading behaviors between introverts and extroverts. Those differences are sometimes explained by a theory that says that extroverts tend to be reward-sensitive people while introverts tend to be threat-oriented, with the emphasis on the word "tend."
When trading, extroverts who tend to be reward-sensitive can easily conjure the successful completion of a trade. Their trading behaviors can be fueled by images of the savings they'll accumulate and items they'll purchase as a result. Once their trading choices are fueled by those images, extroverts are more likely to ignore those little nagging warnings or worries about risk.
Therefore, Cain warns, if you're an extrovert, you should avoid "surrounding yourself with images of reward at the crucial moment of decision" (170). Don't hang a picture of the Shelby Mustang you'll buy above your monitor in the office from which you trade. Don't put your dream house or dream vacation destination as background on that computer screen.
It doesnâ€™t matter, Cain advises, whether the image has anything to do with trading. Research shows that those who are reward-sensitive (reward-seeking) are more likely to ignore possible risks if they are shown any images at all related to reward. She advises against . . . ahem, shall we say "suggestive" images near where you trade for the same reason.
Introverts should heed the same warning. Does that surprise you? Remember how Cain would warn against too much generalization? It turns out that although introverts as a group are more threat-oriented and more immune to an overdone response to possible reward, they're not always unmoved by potential reward. Perhaps more important to introverts, however, is the advice to stay true to their own way of working and not be swept into trades by the enthusiasm of fellow traders. Those who are threat-oriented will not be rewarded by trades that heighten their sense of threat. They may prefer, as I have found in my own trading, to concentrate on one larger trade rather than many smaller ones, a tactic she calls favoring depth over breadth. Don't try to behave like a "zestful, reward-sensitive extrovert."
Fellow introverts should value our own thoughtful progress toward a goal. Otherwise, we can be overwhelmed. That certainly happened to me when I decided on a campaign to expand my trading repertoire, spreading out risk by engaging in several different strategies at once. I was mixing diagonals, iron condors, butterflies and calendars that I entered at staggered times to expiration so that time and vega risks were mixed. That sounds good in theory, and it might be a good tactic for extroverts, but it wasn't for me.
Surprisingly, here in the U.S. and in many Western cultures that value extroverts, many of us introverts have learned to behave like extroverts. We may even have convinced ourselves that we've overcome our introvert natures. Those introverts who are shy, for example, (not all are) may have learned to interact more than they once did. We haven't overcome our general makeup, however.
How do you know if you're reward-sensitive or threat-oriented? Reward-sensitive people tend to feel excited and energized by getting something they want, go all out to get what they want, get excited "right away" when they see an opportunity for something they want, are affected greatly when good things happen to them and "have very few fears compared" to their friends (171).
When I first read this list, I remembered back to all those Christmases when I always had to mock being extra excited over presents, even those that pleased me. I didn't want to disappoint those who had given me gifts, but my tendency is to quietly appreciate gifts each time they're used, thinking about who gave them. I react the same way to trades that work. I don't get all excited but think about the risks that I "escaped" with that one. Nope, I wasn't reward-sensitive, I didn't think. No surprise.
Threat-oriented people? I hate to type this list because it sounds so wimpy, but here goes. We tend to be hurt by criticism, feel worried or upset when we think someone is upset with us, have an exaggerated response to possible future unpleasantness, worry when we think we've done something wrong, and worry about making mistakes. I've accepted my inner introvert and threat-oriented self, as all introverts must do if we're to trade successfully (much less live successfully). Not only can we become overwhelmed if we ignore our own approach to trading and reaching our goals, but also we have much to offer others, too, when we think and warn about risks.
For example, Cain and others point to instances when nerdy types were warning of risks and excesses in the market in the time leading up to the Lehman collapse and being ignored in an atmosphere that rewarded those who talked louder and took more risks. If you're interested in reading further, she reaches intriguing conclusions about how and why we got ourselves into such a financial mess by 2007-2008. She also offers lots of comfort for the nerdy types among you. I suspect I'm not alone among traders.