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What Is Your Futures Trading Style?

, | March 8, 2024 | By

Futures trading requires both creativity and a pragmatic approach to conducting day-to-day business. Unlike professions where you work in a group or team, active traders must do everything themselves, playing the roles of manager, market pro and accountant every time they make a trade.

Pulling off this diverse array of duties requires a wide-ranging skill set, and having certain personal attributes can ease the physical and mental demands of future trading and boost long-term sustainability. Understanding your own personality, talents, and tendencies is key to becoming a winner in the marketplace.

Know Thyself Before Entering the Market

Trading in the futures markets from a position of strength is much easier said than done. Studying the market, developing strategies, and using the services of a competent futures trading broker are all tasks that most traders readily accomplish. Nonetheless, sustaining long-run profitability proves elusive for many traders.

A primary reason for failure in the futures markets is a disconnect between a trader’s adopted methodology and his or her personality. Any conflict between the two will undermine the viability of even the strongest trading strategies. If you do not believe in your approach, it’s sure to crumble in the face of adversity.

The best way to align your personality and trading approach is by conducting a simple self-inventory. By answering these six questions honestly and thoroughly, you’ll gain insight into your own psychological makeup.

  1. What does money mean to me? Views toward money stem from our surroundings, upbringing, and current financial situation. Understanding how you feel about money will help to identify your ideal risk profile.
  2. Am I right-brained or left-brained? Active trading is the intersection between the analytical and creative mind. Being aware of your tendencies in this area is useful in choosing strategies that are intuitive.
  3. Am I paranoid and irritable? Flying off the handle easily or believing the market is out to get you are destructive to profitability. If you are a hot-head, a hands-off approach to the markets may be worth investigating.
  4. How do I respond when adversity strikes? The market is sure to challenge even the toughest individuals. Being resilient is essential to success.
  5. Can I think on my feet? Active trading involves decision-making on a minute-by-minute basis. Having the ability to be decisive is imperative.
  6. Is the sky the limit or is the limit the sky? An optimistic perspective toward the markets, and even life in general, is a common attribute among strong traders.

These questions are a great place to begin your self-evaluation. The answers touch on your temperament, views toward money, and creative inclinations. You can use this information to tailor a custom trading plan designed to eliminate any psychological conflicts.

Of course, as in all things trading, change is guaranteed. Your answers to many of these questions will evolve over time, as will your personality and trading style. As an active trader, current performance is everything, and the development of your trading style never stops. It will be important to revisit the quiz periodically to fine-tune your approach to the marketplace.

Which Is It: Fundamental or Technical?

A trader’s personality and aptitudes are key determinants in whether fundamental or technical trading strategies are ideal. The answers to the quiz above should give you an idea of who you are and which styles of trading will give you your best shot at achieving longevity in the marketplace.

Specific attributes lend themselves better to certain styles of trading. Here are a few skills and personality traits typical of fundamental and technical traders:

  • Fundamental: Traders who focus on traditional aspects of the markets are inclined to trade according to fundamentals. They are rational, logical, detail-oriented people who believe in cause-and-effect relationships. A big-picture perspective is common, with the primary goal being to spot a security’s intrinsic value in relation to performance, growth prospects, and various economic trends. Fundamental traders often practice a discretionary trading methodology.
  • Technical: Market technicians are interested in the behavior of price action and little else. They typically fall on the creative side of the personality scale but also possess strong analytical and numbers skills. Individuals who flourish using technicals are commonly interested in systems development and trade automation.

Not Sure Which Way to Go? An Experienced Futures Trading Broker Can Help

If you’re having difficulty deciding whether fundamental or technical trading is right for you, don’t worry. The beauty of futures trading is that you don’t have to choose between the two. In fact, many traders integrate elements of both styles into their strategic approach to the marketplace.

For more information on how to get involved in the markets, schedule a conversation with a StoneX broker. No matter your walk of life or aptitude, a simple 1-on-1 dialogue with a seasoned professional is a great way to begin your venture into the marketplace.

Download the eBook: Futures and Options Strategy Guide