"There are plenty of good people, but only a very, very few are precise and disciplined." --Anton Chekhov
John's trading desk features four large flat-panel monitors staring him in the face. They are powered by two computers each loaded with enough memory to kill a horse. He's at his command post, with everything up and running, at least an hour each morning before the market opens.
He skims three online newspapers and a number of pertinent sites for information that may impact the day's action. From his reading and chart study, he formulates a watch list that he will favor for the day's trading. His office is neat and organized and he knows he can find what he needs without a lot of searching.
He takes short breaks during the trading day but rarely picks up the phone during market hours. He's precise in his trading, keeping a record of each trade he makes and noting his thoughts and feelings during the trade. He uses this journal to review trades that didn't work out to discover how he may improve.
He often does research after the close of the market before going out for exercise. He likes his life in order and doesn't react well when there are surprises. John is an obsessive-disciplined trader, and is sometimes burdened with the anxiety that goes with this type.
Obsessive-disciplined traders are so focused on detail they sometimes miss the larger picture. At times, their need for control makes them uncomfortable around others who are more spontaneous. They are punctual and experience some anxiety and frustration when they or others are late for appointments.
Their style of dress, personal grooming and care for possessions reflect an orderly mind. They like to be in control. They expect a lot from themselves, are high-achievers and have high expectations of others as well. They are often
perfectionists and overly harsh on themselves when they don't measure up.
This investor type likes to save money and make sure they have cash on hand for emergencies. They keep close tabs on their finances, are good with budgets and like their checkbooks balanced. They do not like wads of bills scattered loosely or crumpled up in their pants or purse. Even if they are not active traders, they like to check their investments often. If they spend a lot of time online, some become compulsive portfolio checkers.
Many are conservative in their investment style and not prone to take large risks. But they aren't afraid to take reasonable, thought-out risks and are the type most likely to perform the due diligence required to feel fully informed before putting money on the line.
Some obsessives prefer mutual funds that are balanced and not too heavily oriented toward aggressive growth. They are good at paying attention to asset allocation models that tell them not to place too much weight on any one category. If anything, they will tend to have too many overlapping funds in their portfolio. They are careful in the use of margin, and tend not to be candidates for abusing its power.
The Obsessive as Investor
When it comes to individual stocks, they easily become attached to companies, and will hold them longer than may be desirable. For example, many in this camp who lost significant amounts over the last two years could not alter their long-term thinking fast enough to dump positions they had held for years when they began to plummet.
Some become good technicians and enjoy the minutiae of analyzing charts. Others like to dissect company fundamentals and pore over quarterly reports. And some do both.
Those of the obsessive type who are not highly interested in computer technology and willing to face the anxiety of short-term trading prefer to become intermediate and long-term investors. They are ideally suited in temperament for this time frame. They can easily hold stocks for years at a time. Their patience serves them well in this way, although, as mentioned above, they are not known for having an easy time of selling when they are holding a losing position.
They can handle the daily or weekly gyrations of the market because they stay focused on the long haul. And they like getting to know a company thoroughly, to the point of following news releases closely and listening to earnings reports.
The Obsessive as Active Trader
Because they are thorough and attentive to detail, if they have a strong interest in the market, the obsessive-disciplined type may turn himself into a good short-term active trader. They like getting to know a few companies well, learning their typical price patterns. The truly obsessive can get lost in watching their favorite stocks on a tick-by-tick basis on a level 2 screen for hours at a time. On the down side, they may lose sight of other stocks, sectors and markets because of their narrow focus.
But to become a position or day trader, they have to overcome the anxiety that goes with short-term trading and their basically conservative orientation. They are prone to worry too much about the positions they take -- some have trouble holding positions overnight for fear of how the news will affect their holdings. Many simply do not enjoy the gambling aspect that appeals to many short-term traders. The adrenaline rush is experienced as anxiety rather than excitement.
But if they are able to transform the anxiety into excitement and learn the risk-taking mentality that characterizes short-term trading, they can trade with the best of them. These people do their best trading where they can control the environment, like from a home office.
I ran into some obsessive-disciplined types who thought of themselves as experts in one or two stocks that they learned thoroughly and felt comfortable darting in and out of. They combined this micro-trading with some position trading and longer-term investments and had learned to manage their anxiety by balancing the varying time frames.
In summary, the obsessive-disciplined trading type, with a willingness to confront and surmount the nail-biting and quick decision making that accompanies short-term trading, may become good at it. But these types tend to be most suited for intermediate and long-term investing.
Results of Shrink Rap Trivia Contest #2: This was a tougher question than the first contest, so I had fewer responses but most of them got at least the correct name: Kahlil Gibran. This was from "My Soul Preached to Me," in Thoughts and Meditations. A book goes out to the winner, Rob Lester in Atlanta, Georgia.
Steven J. Hendlin, Ph.D. is a clinical psychologist in Irvine, Calif. He has been in private practice for the last 25 years, investing for the last 20 years, and actively trading online as a swing trader and long-term investor since 1996. He is the author of
The Disciplined Online Investor
recently translated into Spanish. He is pleased to receive your comments and questions for publication in his public forum columns at
email@example.com, but please remember that he is unable to provide personal counseling or psychotherapy through the mail.
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