What Does Your DISC Profile Say About the Way You Trade?

Have you ever taken a DISC Profile assessment? If you have, you probably remember being identified with one or more of four primary behavioral styles: Dominance, Influence, Steadiness and Conscientiousness, or D, I, S and C. DISC has been used for years in business to help people understand how they communicate, make decisions and respond to challenges. But I have often wondered whether those same behavioral tendencies might tell us something equally important about the way we trade and invest.

If you have never taken a DISC assessment, or it has been a while, you can take a free one here:

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Keep your results close as you continue to read. Instead of looking at your profile simply as a description of how you interact with other people, consider a different question: What might your DISC profile tell you about the way you behave when money is on the line?

Over the years, I have worked with thousands of students learning to trade and invest, and one thing continues to fascinate me: people behave very differently when placed in the same market environment. Two students can learn the same strategy, follow the same rules and see the same opportunity, yet behave completely differently. One immediately wants to enter while another needs more confirmation. One takes a loss and moves on while another moves the stop, convinced the market will come back. Some feel compelled to trade constantly, while others identify good opportunities but never pull the trigger.

We often assume these differences are about knowledge or experience. Sometimes they are. But there is another variable we don't talk about nearly enough in trading education: the person placing the trade.

Consider the high-D, or Dominance, personality. Dominance is associated with action, decisiveness, competition and results. In trading, those characteristics can be tremendous assets. A “D” may have little difficulty pulling the trigger, making decisions with incomplete information or recovering from a losing trade.

But nearly every behavioral strength has a corresponding weakness when taken too far. Decisiveness can become impulsiveness. Confidence can become overconfidence. Competitiveness can turn the market into an opponent that needs to be defeated. The market, however, has no interest in our opinion and certainly doesn't care whether we win the argument. For the “D” trader, learning when to sit on their hands may be just as important as learning when to act.

The “I”, or Influence, personality tends to be enthusiastic, optimistic and socially engaged. These traders may enjoy discussing markets, exchanging ideas and finding the next great opportunity. The danger is becoming attracted to the story surrounding an investment. Financial television, YouTube, social media and market commentators constantly provide us with the next great stock or investment theme. For the I trader, an important discipline may be learning to separate the story from the trade. A great story does not necessarily make a great investment.

The “S”, or Steadiness, personality values patience, consistency and stability. Those characteristics may be particularly well suited for long-term investing. Successful investing often requires buying quality assets, giving them time, reinvesting and allowing compounding to work. One of the hardest things to do with money is nothing, and the S investor may naturally possess the patience many market participants spend years trying to develop.

But patience can also become stubbornness. There is a significant difference between giving an investment time to work and refusing to acknowledge that the original thesis was wrong. Sometimes the smartest thing an investor can say is, “I was wrong.”

Finally, there is the “C”, or Conscientiousness, personality. This is often the analytical trader who wants data, charts, probabilities, technical indicators and evidence before committing capital. That discipline can be an enormous advantage in markets driven by emotion.

Analysis, however, has its own trap. Eventually somebody must push the button. The C trader may continue searching for one more piece of confirmation until a perfectly good opportunity has disappeared. The same characteristic that protects the “C” from impulsive decisions can lead to analysis paralysis.

So which DISC personality makes the best trader?

I think that is the wrong question.

A better question is: What does my natural behavioral style cause me to do when money, uncertainty and emotion collide?

Trading is decision-making under uncertainty, and uncertainty has an interesting way of magnifying who we already are. An impatient person becomes more impatient. A competitive person becomes more competitive. An analytical person searches for more information. A cautious person becomes even more cautious. And a confident trader can become dangerously confident after several winning trades.

This is where self-awareness becomes so important. The goal isn't to change our personality. The goal is to recognize how our natural tendencies influence our decisions and build a process that protects us when those tendencies begin working against us.

If I know I tend to be aggressive, I can create rules that slow me down. If I become emotionally attached to an investment, I can determine beforehand what would prove my thesis wrong. If I hate taking losses, I can establish my exit before entering the trade. If I tend to overanalyze, I can establish objective criteria that tell me when I have enough information to act.

Perhaps this is also one of the best arguments for having a written trading plan. A good trading plan does more than identify entries and exits; It protects us from ourselves.

The market doesn't know whether we are a D, I, S or C. It doesn't know how long we have traded, how many classes we have taken or how strongly we believe in our analysis. The market simply presents information and forces us to make decisions about risk.

That is one reason I continue to find trading and investing so fascinating. Every trade tells us something about the market, but if we are willing to pay attention, every trade can also tell us something about ourselves.

So, take another look at your DISC profile, only this time look at it through the lens of your trading. Where do your natural tendencies give you an advantage? Where might those same tendencies be costing you money?

Because in the end, the most important trading system we will ever develop may not be the one sitting on our computer screen.

It may be the one operating between our ears.