Sunday, October 18, 2009

Ten Characteristics I See Among Successful Traders

There's no one formula for trading success, but there are a few common denominators that I've tracked in my years of working with traders:

1) The amount of time spent on their trading outside of trading hours (preparation, reading, etc.);

2) Dedicated periods to reviewing trading performance and making adjustments to shifting market conditions;

3) The ability to stop trading when not trading well to institute reviews and when conviction is lacking;

4) The ability to become more aggressive and risk taking when trading well and with conviction;

5) A keen awareness of risk management in the sizing of positions and in daily, weekly, and monthly loss limits, as well as loss limits per position;

6) Ongoing ability to learn new skills, markets, and strategies;

7) Distinctive ways of viewing and following markets that leverage their skills;

8) Persistence and emotional resilience: the ability to keep going in the face of setback;

9) Competitiveness: a relentless drive for self-improvement;

10) Balance: sources of well-being outside of trading that help sustain energy and focus.

Over the years, I've learned to respect more the traders who sustain success over many years than the traders who have blowout individual years of profitability. The above criteria are a kind of checklist one can use to determine if you share the qualities I see among those career successes.

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5 comments:

The Financial Philosopher said...

Dr. Brett:

I imagine self-knowledge might be something you have also found to be crucial to success?

Specifically, it would seem that the most successful traders get some kind of fulfillment from the act of trading in itself and that a monetary measure of success is secondary.

It would be interesting to see studies of this: Traders who are more successful because they cared less about money than the fulfillment in the act of trading.

In other words, the best of traders are those who simply enjoy trading; therefore, they are more inclined to operate from self-feeding, self-actualizing energy.

Do studies like this exist? I would be interested in seeing them.

Thanks, as always, for your good work, Dr. Brett...

Kent

toad37 said...

Thanks for another helpful post on this important topic.

Quick question (hopefully not too far off-topic)-

A trader I respect very much recently suggested I take John Person's emini course and trade in his virtual trading room. Can you give me any feedback on John's system and any good/back feedback you may have on it?

Thanks so much!

Todd

GD said...

Nice post Dr. Brett. I may be new in the world of trading, but I think if you do it by yourself and learn the process without looking for the quick money, I am very sure you can get there.

Carson said...

Survivor bias.

MaskedFinancier said...

Thanks for the post Dr. Brett.
IMHO, many of these characteristics can be learnt through the medium of Texas Holdem Poker – something I promote as a tool for learning to invest - Texas Holdem Investing is the concept I have developed.
I took the liberty of making some comments to this effect below on the basis of your 10 characteristics:
1) Time spent on trading outside of trading hours – if you don’t spend time learning about Texas Holdem poker then you will never improve when you’re playing
2) Dedicated reviewing of trading performance and adjustments to shifting conditions – performance analysis is a vital part of Texas Holdem, and you have to adapt your game to the current table / tournament
3) Ability to stop trading when not trading well – a good Texas Holdem player needs to be able to avoid “going on tilt”
4) Ability to be more aggressive and risk taking when trading well and with conviction – when hands go your way in Texas Holdem you need to bet hard to maximise your winnings
5) A keen awareness of risk management in the sizing of positions – you need to manage your bankroll at the game and session levels, and over time.
6) Ongoing ability to learn new skills, markets, and strategies – a Texas Holdem player needs to keep learning about the game and about how to play in different situations
7) Distinctive ways of viewing and following markets that leverage their skills – you need to find the style of Texas Holdem play that most suits your abilities and psyche (assuming that you have the right qualities in both respects)
8) Persistence and emotional resilience: the ability to keep going in the face of setback – a good Texas Holdem player will be able to sit through many bad hands without getting down emotionally, and can also cope with terrible bad beats and avoid emotional distress
9) Competitiveness: a relentless drive for self-improvement – the desire to compete is vital to perform well in the arena of Texas Holdem poker.
10) Balance: sources of well-being outside of trading that help sustain energy and focus – you can’t play Texas Holdem all the time so you need to develop balance in the rest of your life
I would appreciate any feedback on the above.
Keep up the good work.
John