Have you ever heard the term 'Professional trader'? I'm pretty sure you did, plus once you google it... thousands of definition jumps at you. What's the truth then, who is that 'PT', are You one of them my great reader?
When most people think of a professional trader, several clichéd images probably comes to mind.
The first cliché is that of the Gordon Gekko-type alpha-male.
The guy who sleeps just a few hours a night and neglects all other worthwhile pursuits (such as health, family, and moral values) in order to win, win, win. They choose the trading life because they thrive on competition and they’ll do whatever it possibly takes to attain another victory.
Another popular image is that of an obnoxious adrenaline junkie.
Someone who spends their days trading, their nights gambling, and their weekends racing motorcycles. They’re in the trading game for the excitement, the thrill of taking big risks.
And finally, there’s the clichéd idea of the “math geek” trader.
This is the stereotypical “quant,” the guy who spends all waking hours staring at computer screens in a dark room while he tests and re-tests complex equations. This type of trader is seen as a hermit whose only joy in life comes from discovering new mathematical formulas.
There are aspects of these three clichés that are very true.
Successful traders, for the most part, truly DO love to compete; they DO have
a higher capacity to handle high risk and control their emotions in stressful situations; and they DO tend to have a fascination with finding historical trends that accurately predict future behaviour.
However, all three of these trader clichés are overdone and overly false representations of what a successful trader looks and acts like.
I’ve spent more than 25 years studying the greatest traders in the world and
I can tell you that not a single one of them could be fully described in one of the three personas mentioned above.
Successful traders, like successful people in general, have a variety of personalities and interests. No two are exactly alike and there is no obvious “formula” for predicting which traders will be successful and which ones will fail. (Go back to Richard Dennis’ famous “turtle experiment” for a fascinating and convincing study into this fact.)
What I have found is that while top traders share several behavioural tactics that can be learned and developed – such as the propensity to admit mistakes quickly, to stay calm and rationale under pressure, to focus intensely on the situation at hand, etc. – there is one overpowering CHARACTERISTIC that all great traders have. And I’m not sure this characteristic is something that can be forced on someone; it seems to be something you are either born with or acquire very early in childhood.
The number one characteristic that all great traders have is the insatiable desire to acquire more and more knowledge.
When you think about this characteristic, it becomes rather obvious that traders would have it. In fact, the concept of making a living using solely the power of one’s mind is probably what attracted them to the trading profession in the first place.
Great traders often see the attainment of wisdom as life’s highest value. They are constantly seeking to gain new understandings of reality. They love to solve difficult puzzles and develop new solutions for pressing problems. They start each day with a passionate yearning to learn something new and exciting.
In this sense, traders and entrepreneurs have a common bond.
What’s interesting to me is that this quest for knowledge (or, more appropriately, wisdom) certainly isn’t limited to the stock market. Indeed, traders tend to have a strong fascination with a number of “academic” subjects such as psychology, philosophy, sociology, theology, history, economics, and politics.
I’ve found it to be the norm for top traders to surround themselves with shelves and shelves of books covering a number of different topics. It’s also no accident that many traders end up getting heavily involved in political, social, and theological causes.
Almost every great trader seems to have a particular interest in “the psychology of success.” That is, the study of what separates a happy,
well-rounded, and successful individual from one who is not.
Have you ever noticed how many of the great traders who have written books tend to include sections that have nothing to do with the markets and are completely focused on success, psychology, or “self-help” advice? Nicolas Darvas himself dedicated an entire book to his success philosophy.
The thirst for knowledge is probably a leading characteristic for success in any field. The fact that top traders share this characteristic comes as no surprise.
The real question is: can this characteristic be taught? Can it be acquired? Can those who are most comfortable believing what they’ve always been told and enjoying the security that comes from never questioning their long-held beliefs suddenly be taught to change their ways and start a quest for new knowledge?
Questioning strong beliefs, breaking out of the status quo, and going against the crowd can be troubling and unpleasant. If things are going decent in your life, why put yourself through the mental angst of breaking new ground and shattering previously assumed “facts?”
It can also be a lot of hard work. Not everyone finds it enjoyable to spend long nights and weekends reading books and developing new theories and philosophies.
For top traders, this characteristic isn’t a choice. It’s embedded in them.
How about you?
Let me introduce you to 'Professional Self-Evaluation Checklist' and ask: can you tick all the boxes? If you are, congrats - you PRO, if you haven't - do not despair my friend, help is here.
Ready? Here it is:
What is the quality of your self-talk while trading? Is it angry and frustrated; negative and defeated? How much of your self-talk is market strategy focused, and how much is self-focused? Is your self-talk constructive, and would you want others to be talking with you that way while you’re trading?
What work do you do on yourself and your trading while the market is closed? Do you actively identify what you’re doing right and wrong in your trading each day—with specific steps to address both—or does your trading business lack quality control? Markets are ever changing; how are you changing with them?
How would your trading profit/loss profile change if you eliminated a few days where you lacked proper risk control? Do you have and strictly follow risk management parameters?
Does the size of your positions reflect the opportunity you see in the market, or do you fail to capitalize on opportunity or try to create opportunities when they’re not there?
Are trading losses often followed by further trading losses? Do you end up losing money in “revenge trading” just to regain money lost? Do you finish trading prematurely when you’re up money, failing to exploit a good day?
Do you cut winning trades short because, deep inside, you don’t think you’ll be able to make large profits? Do you become stubborn in positions, turning small losers into large ones?
Is trading making you happy, proud, fulfilled, and content, or does it more often leave you feeling unhappy, guilty, frustrated, and dissatisfied? Are you having fun trading even when it’s hard work?
Are you making trades because the market is giving you opportunity, or are you placing trades to fulfill needs—for excitement, self-esteem, recognition, etc.—that are not being met in the rest of your life?
Are you seeking trading success as a part-time trader? Would you be seeking success as a surgeon, professional basketball player, or musician by pursuing your work part-time?
Can you identify the specific edges you possess over the many other motivated, interested traders that fail to achieve success in the markets? Do you really have an edge, and—if so—what are you doing to maintain it?
Done? Cool, do let me know your results.
The fact that you’re here, reading my blog, is a good indicator that YOU probably have a desire to constantly increase your wisdom, question old beliefs, and expand your knowledge base.
That characteristic will certainly give you a leg up in the ultra-competitive trading profession.
Alright then YOU PRO - Chase The Greatness!