The ten-question test is step 1 of the course's four-step roadmap: the eye exam before you choose your glasses. Answer ten questions, read what each answer suggests, and see which style is closest to you.
Take a sheet of paper and answer these ten questions. Write your answers based on your life today, as it really is.
Then show your answers to someone close to you. A partner or a friend who knows you well often knows better than you do how patient you are.
Your life
1. How much time do you really have? Think of a normal working day, after your job, your family and your sleep. How many hours can you look at the chart, and at what times?
What your answer suggests: if you have only a few minutes in the morning or the evening, swing and position trading come more naturally. Day trading becomes possible when several unbroken free hours fall in the busiest hours of your market.
Your emotions
2. How patient are you? Can you hold a trade for two or three days while it is in profit or in loss? Or do you check the chart every ten minutes?
What your answer suggests: swing or position trading suits you if you can hold a trade for days and check it only at set times. If you keep checking the chart, either choose a shorter style or replace the checking habit with setting an alert.
3. Do you sleep well with an open trade? How much does a trade that stays open overnight or over the weekend occupy your mind?
What your answer suggests: if an open trade at night spoils your sleep, day trading gives you more peace. In this style every trade is closed before the day ends. If you sleep well, swing and position trading are open to you too.
4. How do you handle a loss? When a trade goes into loss, do your sleep and appetite suffer, or do you stay calm?
What your answer suggests: if one loss ruins your day, make your position size small enough that the loss on each trade is bearable. In the study by Lo and his colleagues, stronger emotional reactions to gains and losses went together with weaker results.
5. Which is harder for you? Several small losses in a row and, now and then, one big profit? Or many small profits and, now and then, a bigger loss?
What your answer suggests: trend-following methods, like the Turtles' method, usually have many small losses and make their profit from a few big moves. Do a few losses in a row push you out of a method? Then methods with a higher win rate and closer targets will feel more natural to you.
6. If nothing happens on the chart for an hour, do you get bored and want to do something?
What your answer suggests: a need for excitement pulls you towards scalping and day trading. The same need also brings the risk of trading too much.
Your mind
7. How fast do you decide? Are you at your best in ten-second decisions, or do you need to think things through?
What your answer suggests: scalping and day trading need fast and accurate decisions. If your best decisions come after a cup of tea and a second look at the chart, the higher timeframes are your place.
8. How does your mind decide? Do you trust numbers, statistics and precise rules, or your own observation and experience of the market?
What your answer suggests: the first answer points you towards rule-based methods and the second towards judgement-based methods. The section "Rules or judgement?" in The four trading styles, and two more choices explains both.
9. Do you enjoy reading news and economic reports, or is only the price chart interesting to you?
What your answer suggests: an interest in the economy and the news brings you closer to fundamental or mixed analysis. That interest usually fits longer horizons. An interest in the chart alone fits technical analysis on any timeframe.
10. How much do other people's opinions affect you? When you see someone else's opposite analysis, do you change your mind? How many trading channels and groups do you follow?
What your answer suggests: if other people's analysis quickly changes your mind, you need written rules and a quieter environment. Darvas, too, succeeded only once he moved away from the noise of Wall Street.
Reading your answers at a glance
| If most of your answers look like this | The style probably closest to you |
|---|---|
| Hours of unbroken time, quick decisions, a need for excitement, small losses accepted calmly | Scalping |
| A few set hours a day, a liking for a daily routine, sleep without an open trade | Day trading |
| Limited time, patience for several days, calm with an open trade overnight | Swing trading |
| A long-term view, an interest in the economy, no concern about daily swings | Position trading |
The test is a tool for thinking. It does not count as a scientific psychological test. If your answers are split between two styles, start with the slower one. Fewer decisions give you more room to learn.