Psychodiagnosis of the currency market. Using MMPI and CHT questionnaires

Alexander KuryashkinFreshForex trainer

The Forex market does not stand still. In the same way, more and more new methods for its analysis appear. Psychology is considered by many famous traders to be the key to success. I offer you a method by which you can look at the market from a completely different angle. Moreover, this method is not a subspecies, not a kind of technical or fundamental analysis.

So, the method is called market psychodiagnostics and is a sequence of actions of assigning a price of a mental state to the investigated area of motion.

Using this method we can "diagnose" the market at a certain point in time, analyze the mood of market participants, talk about potential risks, the degree of price fluctuations, the duration of the current trend.

Modern psychodiagnosis is increasingly being used in such areas of social practice as:

1) staffing, selection and career guidance;
2) predicting social behavior, for example: stability of marriage, law-abiding behavior;
3) optimization of training and education;
(4) Counseling and psychotherapy;
5) forensic psychological and psychiatric examination;
6) predicting the psychological effects of environmental change;
7) determination of the diagnosis - the state of the currency or stock marketThe following are some of the most important factors in the development of the market.

The methodology of psychodiagnosis of the market

Psychodiagnostic technique - is one of the tools of scientific research in the psychology of personality and interpersonal relations. Thus, with the help of psychodiagnostics we can identify the interests of society as a whole and the interests of its specific members (traders, hedgers, arbitrageurs, investors and other market participants).

Psychodiagnosis in a practical sense can be defined as psychological diagnosis - A description of the state of price movement over a certain period of time.

Three basic stages can be distinguished in a psychodiagnostic examination:
- Data collection;
- Data processing and interpretation;
- Judgment - psychological diagnosis and prognosis.

There are multi-factor questionnaires, and usually not just one test is used, but a number of tests that mutually complement and control each other. When analyzing the currency market, we use two tests - the MMPI and the CHT.

MMPI questionnaire

Minnesota Multidimensional Personality Inventory (MMPI) belongs to the group of systemic techniques. The MMPI technique is based on laws whose influence has been proven experimentally.

The MMPI scales are distinguished:

1) hypochondria;
2) depression;
3) emotional lability (hysteria);
4) psychopathic deviation;
5) masculinity/femininity;
6) paranoia;
7) psychasthenia gravis;
8 ) schizoidism;
9) optimism (hypomania);
10) extraversion/intraversion.

CHT questionnaire

The CHT questionnaire determines character traits and temperament, developed at the Military Institute of Physical Culture on the basis of the Multidimensional Questionnaire (MMPI), assesses emotional reactivity, neuroticism and level of pretensions, typological features and some other indicators.

The CHT questionnaire has 10 sections containing a range of information:

The 1st is about the strength of the nervous processes by excitation (it is mainly performance, compliance with the "law of force", dominance);
The 2nd is about measuring psychophysical thresholds of the nervous system (sensitivity);
The 3rd is about the strength of nervous processes by inhibition;
The 4th is about the mobility of nervous processes;
The 5th is about emotional lability, reactivity;
The 6th is about the development of the first signaling system;
The 7th is about the development of the second signaling system;
The 8th is about increased nervousness and some psychopathic deviations in a person's character;
The 9th is about sincerity;
The 10th is about the level of pretension.

Practical use of questionnaires in Forex

Analysis methodology: we take the test currency pair, determine the range (month, day, hours, etc.). Closing prices are used for the analysis and correlated with the MMPI and CHT test scales, so we have "response points" of the whole mass of market participants corresponding to certain price values. The process of the analysis of the technique itself can be seen in the example:

Example of psychodiagnostics for the EUR/USD pair for March 2011.

The strongest correlations revealed on the scales of cht5 and mmpi9. The scale is focused on revealing excessive excitability of the nervous system in situations of psycho-emotional tension. The scale of emotional lability reflects high emotional excitability and instability of emotions, accompanied by hyperactivity of the nervous system. In this connection it is possible increased volatility in the market.

The leading peak on the 9th MMPI scale normatively corresponds to the optimism scale, which reflects traders' active personal attitude, high level of zest for life, self-confidence, positive self-esteem, high motivation to achieve certain goals. Increase of the profile on the 9th scale can reflect a high level of motivation and activity, formed by a pronounced feeling of threat of negative news release.

In addition to the main strongly correlated scales, namely those scales with a confidence level higher than 0.95, the psychological picture of the market is also influenced by the other scales of the tests.

The full distribution of these qualities in the market participants is shown in the chart below.

Discover correlations is simple enough. We can look at the correlation matrix, where we will see under 23 ordinal number our analyzed section of the market, which correlates with the scales of the tests.

1)ch1; 2)ch2; 3)ch3; 4)ch4; 5)ch5; 6)ch6; 7)ch7; 8)ch8; 9)ch10; 10)mm1; 11)mm2; 12)mm3; 13)mm4; 14)mm5; 15)mm6; 16)mm7; 17)mm8; 18)mm9; 19)mm0; 20)mml; 21)mmk; 22)mmf; 23)mmf

Matrix of correlations of EUR/USD price movements and psychological traits

Probable development scenario - a pullback to the level of 1.39-1.40. And, as practice shows, the pair will continue the upward movement with the target of 1.43-1.44.

Psychodiagnostics is more aimed at analyzing the market "in the moment", you can predict the price movement to a greater extent from the influence of the strongest factors and the duration of the influence of some mood. For example, the values of the "optimistic" scale at uptrend are often symbolic of the continuation of this trend. High scores on the "emotional lability" or "sensitivity" scales would indicate high volatility of the studied pairAnd the forces of the "bulls" and "bears" will be approximately equal.

This kind of analysis can be used to assess the emotional background of market participants. Specify the mood. Moreover, this analysis can be applied to any timeframe.

The methodology used, in addition to foreign exchange market can also be applied to the stock or commodity market.