Investment Psychology Inventory Profile

If you have been trading or investing for over six months, Dr. Tharp recommends the completion of the Investment Psychology Inventory profile. This analysis is a helpful tool in determining your areas of strength as well as areas of weakness as a trader. It can help guide you towards the areas in which you most need to focus.

The Investment Psychology Inventory™ profile is a 176-item questionnaire designed by Dr. Tharp. Over the past 20 years, Dr. Tharp has conducted extensive research on how stress affects human performance. This unique profile will evaluate your areas of strengths and weaknesses as an investor or trader. You can use the analysis and results from the profile to help guide you in your quest to improve your performance as an investor or trader. Your results are kept in confidence and are never shared with anyone other than you.

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The Investment Psychology Inventory Profile will rank your characteristics in three areas:

1) Psychological Characteristics
2) Decision Making Skills and
3) Management and Discipline.

The profile scores will give you insight into specific questions such as: does your personal life interfere with your trading success, does your attitude support trading activity, do you make decisions without worrying about what others are doing, are you disciplined and patient in your approach to the markets. These are only a few of the many areas analyzed in the profile.

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The test measures ten areas that Van Tharp has concluded are important for trading success. These include:

• A stress level scale – the more stressed you are the less well you'll probably perform as an investor/trader.
• A scale which measures how positive you are. Since you tend to get what you think about, positive people will do better as traders.
• A scale which measures personal responsibility. If you accept responsibility for what happens then you can always fix mistakes. If you blame others, then you do nothing except feel bad and repeat your mistakes over and over again.
• A scale which measures whether or not you are motivated to make money. It's almost an inverse scale because the best traders/investors are not motivated by money, they're motivated by the drive to be the best or by the joy of trading or by the desire to work on themselves.
• A scale which measures conflict. If you are not motivated to make money, then look for possible conflict and if this scale is high, then conflict is probably there.
• Next there is a scale that measures judgmental heuristics. People have lots of biases in which they tend to use shortcuts to make decisions. These can render them inefficient and this scale measures that tendency.
• The next scale measures conformity. Conformist tends to follow the crowd and do what everyone else does. Conformist tend to have less success in the markets.
• There is also a scale that measures intuition. This scale is fairly neutral. Being intuitive is not necessarily correlated with success or failure. Its just good to know where you fall on that scale.
• The next scale tends to measure how organized (and disciplined) you are. It also measures, to a minor extend, how likely you are to use good position sizing.
• The final scale measures the tendency to be a gambler and trade just for the fun and excitement. Good trading tends to be quite boring so those who are in it for fun tend to have a tough time.

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