Tuesday, May 06, 2008

Perspectives on Achieving Greatness as a Trader

I want to thank Abnormal Returns for passing along this excellent New York Times article on the role of habits in learning and creativity.

The article highlighted a few ideas that I think are very relevant to the development of trading expertise:

1) Much of performance learning is the cultivation of positive habit patterns - If you have to make efforts to follow trading rules, that is effort not devoted to tracking markets. The key to success is turning rules into habits, so that they can be followed without effort, preserving mental capital for analysis and decision-making.

2) The development of new habits opens the door to fresh ways of thinking and behaving - I've long noticed that successful traders periodically remake themselves and their trading, adapting to changing market conditions. They cultivate new habits, which aids them in developing new skills and ways of making money.

3) We will learn and perform best by making maximum use of our learning strengths - This is an extension of the notion of operating within a trading niche. If we're engaged in a concerted program of learning and development, it makes sense to ground our efforts in learning competencies.

4) Performance improvement often occurs in small, continuous steps forward - This is an idea central to quality and performance improvement among manufacturing firms. The successful trader may set a single goal each trading session and track progress faithfully. Over the course of a year, that is hundreds of opportunities missed by the trader who lacks such goals. Take a look at this excellent New Yorker article on Toyota and the notion of kaizen. The path of kaizen is difficult to follow, but it's a sure path to excellence.


Trading Psychology Observations


CharlesTrader said...

I have not read this yet, but it has my interest. At the link below can be found a PDF version of the CIA book "Psychology of Intelligence Analysis". I suspect that many of the lessons in the book can be applied to trading.



Ana said...


I believe I can relate to point 4 you made about developing trading expertise.

The notion of Kaizen has been adopted by me unconsciously over the years on hindsight.

I have achieved much by doing little by little each period of my life. Most beneficial is for my brain not to atrophy and to keep my mind receptive to new learnings, which has culminated in my learning now how to trade online.

Following from this, I have embarked on a newsletter of my own called IDkit targeted at newbies.

Habits of learning will lead to endless creativity, I believe.

John Forman said...


In terms of #3, couldn't that be interpretted to mean something like "know how you learn best"? For example, I am a very visual. I retain things I see at a much, much higher rate than things I hear. That being the case, I am best off reading a book rather than listening to a speaker - though I will say that taking notes while I listen helps my retention considerably because I'm making it visual.


David said...

great links this morning and all the time. Thanks Dr. Brett!

robert d said...


Read your blog on intraday volume patterns with great interest. Hoping you can provide a source for historic intraday price/vol data for individual stocks and major indexes.



eddie said...

Ive been following your blog for a while and must admit that some of it is over my head as that Ive been a student of the market for just under a year. I read something in one your posts that I took special note of. You said that the truly successful trader doesn't just try to find out what will happen but why it happens. I assumed you were referring to understanding how the market is interconnected. I've been trying to gather information on what I should be studying. I came across something called INTERMARKET ANAYLSIS, it describes the relationship between 4 major asset classes( stocks, bonds, commodities and currencies). I wanted to get your opinion on this topic. Is it worth persuing as a means of understanding the whys of the market or is there somewhere else I should be looking to lay a foundation for my understanding. In addition I would also like to know if this is useful for swing trading. Thanks. Eddie

Joel said...

Okay, now a different viewpoint.

I think a better reference on changing habits is the book "Don't shoot the dog". I don't like the title because I don't think it indicates much about the content of the book, so let me tell you about it.

"Don't Shoot the Dog" deals with "shaping", or adopting new behaviors. The techniques are universal, as they are used by animal trainers, but can also be used with your children, your spouse, and yourself.

I just find it interesting that the same material comes out in different formats. Buy "Don't Shoot" and work on shaping yourself. It's easier to understand and cheaper.

(one other note: I have no idea why the article is against standardized testing, saying that it somehow inhibits creativity. This notion is holding back the US education establishment as it continues to focus on "creativity" rather than skill development. Think of how much more creativity you can have when you have excellent basic skills!)

Joel said...

oh, and by the way, "don't shoot" also suggest moving in small steps, and then reinforcing them.

cmescalper said...

Hi Dr B.
there is no greatness in succesfull trading. there is greatness in life and as a person which reflects finally upon trading or whatever you do.

Good trading is boring and nothing more.

you can never compare great traders to bad ones also because trading is a state of mind that we can all achieve. thus the "great traders " somtimes fail too.
All the best
Dr Hillel Nasi