Tuesday, August 28, 2007

Two Qualities of Successful Traders

One of the qualities I've noted in highly successful traders is that they don't just follow markets; they also observe themselves. They keep rigorous score: they know how much they make or lose, and they identify what they do right and wrong. In my meetings with them, they don't just look for support. They seek ways to improve themselves and their trading. The very best traders are every bit as hungry to make improvements when they're making money as when they're drawing down.

A second quality I've observed in very successful traders is that they are focused on positive goals, not negative ones. The best traders identify what they want to be doing and turn those ideas into concrete goals for the coming day, week, or month. Lesser traders identify negative goals. They can verbalize what they *don't* want to be doing, but lack a clear vision of what they should be doing to trade well. As a result, they never formulate concrete goals for improvement.

Suppose I reviewed today's trading with you and asked, "What were you working on in today's session? What were your specific trading goals?"

Would you have a clear answer? Were you working on you as a trader, or were you simply working to make money?

The really fine traders turn themselves into objects of study. They never stop improving their trading, refining themselves.


Nathanael said...

Hi brett,

I read a book once that included someones experience while at race car driver school. Apparently when it a spin or skid, the the instructors tell you to keep your focus on where you want to go... not that wall you want to avoid! if you look at the wall it becomes your reference point and you are bound to crash. Even in the dangerous circumstance it seems to pay to be positive goal focused!!

cpptrader said...

Almost seems to be a mix of extraversion and intraversion. Positive outlook plus inward reflection.

Relating this to a prior post, I think your notion of processes as goals aptly fits. If you focus on developing correct processes (not just having positive goals), your end result is much more appeasing.

Thanks always for the great posts,

James said...

Hey Dr. Brett,

I've found that I dont like going into the weekend having sustained greater than average losses. Therefore I have been working on paying extra special attention not getting into jams on fridays. My risk aversion gets higher and I am more likely to quit trading earlier. I am curious if any other readers feel the same way going to into weekends.


Brett Steenbarger, Ph.D. said...

Hi Nathanael,

Great analogy; a similar principle is taught in flight school. We do indeed form reference points based on our gaze. Thanks for the insight.


Brett Steenbarger, Ph.D. said...

Hi CPPTrader,

I think you have a good point: there is a dual focus for the performer, with one eye turned toward the performance goals and the other eye turned inward for self-evaluation. Thanks for the comment!


bruce said...

what nethanael is talking about is why i stay away from the motivation by disgust thing. it's playing with fire.