There is a constellation of personality traits that places a person at risk of becoming excessively dependent on others.
First let’s define the differences between dependent and independent traders. The dependent trader is always looking for quick, easy, and instant profits, without putting in the legwork to earn them. He follows the crowd, especially the crowd that is wrong. He gets into trades based not on real knowledge or wisdom, but on the latest “hot tip” or what he perceives as “insider information” which in fact is nothing more than worthless information that everyone has access to. The dependent trader often turns to fully automated (no effort or thinking required) and overhyped trading systems that promise the moon. Dependent traders trade without their own plans and with little or no understanding of what they are doing. They constantly listen to the advice of various financial pundits and news broadcasters airing “expert” views. As such, they easily get sucked into following the masses into dead-end trades or even ruin.
Independent traders are industrious; they work hard and enthusiastically for everything they desire and get. Independent traders still have some dependence (we all do), but they more appropriately know how and when to seek help and learn from other traders. They will go out of their way to seek people who can educate them in how to be a better trader, not which trades to place. Independent traders are willing to take risks in their efforts and work hard, as they clearly know that often we learn more from failures and mistakes than we do from successes. At the same time, they try their best not to repeat the same mistakes over and over.
What NEO-AC facets are involved with dependency? Traders who measure high in N facets (negative emotions and especially the N1 facet of anxiety) are high in E1 (warmth), low in E3 (assertiveness), and high in A facets (especially A1, trust), are especially vulnerable to this kind of detrimental behavior.
Let’s discuss the concept of mentorship. Dependent traders are those who have a need to be constantly reassured by others, and in particular by those whom they look up to (mentors, teachers, or even “gurus”). Now, there is nothing wrong with having a mentor, as long as the mentorship relationship is a healthy one—where there are clear definitions of the role of each party.
Overly dependent traders, conversely, enter into such a relationship mostly because of a need for frequent reassurance that they are doing the right thing. They may, in fact, possess a very reasonable trading plan of their own. They may even have a very specific potential trade in mind. But they experience too much anxiety over asserting themselves in the markets if they don’t first get a “stamp of approval” from someone else—someone who serves as a sort of authority figure.
Prior to placing a trade, overly dependent traders feel compelled to “run it by” other traders to see what they think of it or what they would do. But by asking for input from others, dependent traders can start to lose focus on their own understanding of the market. They can become confused, or even overwhelmed, by varying opinions and different perspectives on a particular market scenario. They can lose touch with their own trading plan.
Such investors tend to spend far too much time reading self-help trading books, trying to get access to well-known traders from whom they hope to “squeeze” as much information and insight as they can, and so on. By doing such they never truly develop their own unique trading styles that work for them—all because they are too busy trying to emulate or adapt someone else’s style.
If you are anywhere within this camp of developing dependency on other traders, be aware of the potential pitfalls. If you do feel you need mentorship (and you may), make sure you keep to the following principals:
1. Find a mentor that works for you. A good mentor is never a crutch. A good mentor is someone who inspires you and entices you to learn more, blaze your own path, and develop your own style of trading.
2. Limit the number of mentors you have. That’s not to say that you must totally isolate yourself from different ideas (you don’t have to cancel your various subscriptions to trading magazines and burn the numerous trading courses you may have already bought). But for true mentorship, keep it clean and simple. Rely on just a few true mentors to inspire you.
3. The best trading mentors will actually teach you how to develop “self-mentorship.” That is, healthy mentorship is not indefinite and never-ending. Your mentor should be teaching you how to take on the role of being your own coach.
Think of this as learning how to fly an airplane. You certainly want to have your coach behind the controls the very first time you go up in the air. You probably want your coach to give you the controls the second time, but eventually you hope your coach will teach you how to fly all by yourself, and you will go on to be a coach or mentor for someone else. So once you are able to fly confidently by yourself, cut your ties with your mentor. You don’t want your flight instructor in the cockpit with you forever, as this will only prove to be annoying (at best) or unhealthy (at worst).
4. Once you earn your wings, become a mentor to someone else. This will help you continue to grow in your understanding of the markets (and simultaneously increase your own subjective life satisfaction!).
5. Do not depend upon only one method or style of trading. Learn different trading techniques and compare them. Your chances for success as a trader greatly increase if you have decent insight into multiple trading methodologies and styles, especially when using fundamental or technical indicators. It’s good to have some fundamental knowledge of all types of trading before you specialize and adopt the style that works best for you.
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