Monday, June 02, 2014

Building Upon Your Signature Strengths: What Are You Good At?

Postings this week and next will be a bit more spotty, owing to a much anticipated trip to work with traders in Madrid.  Many thanks to Francisca Serrano and Sergio Malagon for their help in organizing the event

One of the topics of my presentation will be an interactive exercise designed to help traders identify their distinctive strengths.  Recent posts have dealt with the importance of a process orientation to trading, but how can traders structure their processes to maximize the odds of success?  My experience--and the findings of Schwager in the Market Wizards books--is that successful traders differ significantly in their approaches to markets.  Some are shorter-term; others are longer-term.  Some are more fundamentally grounded; others trade off price and volume data.  

It is not the presence of any *specific* process that distinguishes successful market participants.  Rather, each has found a way to engage markets that makes specific use of his or her emotional, cognitive, and interpersonal strengths.  Nowhere is this more evident than in the information processing approaches of traders.  The processes of traders with distinctive intuitive strengths are different from those of traders who are highly analytical.  Extroverted traders often work well in teams and process information interactively.  Introverted traders are more self-reflective and analysis-driven.  Many short-term traders focus on pattern recognition; many long-term investors seek causal relationships. 

A crucial question for peak performance is:  What are you really good at?  If you're going to succeed as a trader, it will because you've found a way to take signature strengths and apply them to financial markets.  It's hard to imagine anyone could be distinctively strong in their market performance if they are not drawing upon their own distinctive talents and skills.

So here's a useful exercise:  Draw a series of sine waves with regular peaks and valleys.  For each of the peaks, identify one of your distinctive life successes outside of trading and write down the strengths that made those successes possible.  Make sure you identify at least 10 peak experiences and at least 10 core strengths.

Then, for each of the valleys, identify one of your distinctive life failures or setbacks outside of trading and write down the vulnerability that made those setbacks possible.  Again, make sure you identify at least 10 setbacks and vulnerabilities.

What you'll generally find is that it is difficult to identify 10 truly distinct strengths or vulnerabilities:  the same ones tend to recur throughout life experience.  One way you can see that clearly is to do the exercise a second time, but this time let the peaks represent your best trading experiences (and the strengths that contributed to them) and let the valleys consist of your worst trading experiences (and the contributing vulnerabilities).  The odds are good that the lists will be similar for the two sets of sine waves.

What that means is that success is highly dependent upon playing to our strengths and avoiding our vulnerabilities.  Indeed, the best processes are those that leverage what we do well and minimize what we don't.  Many, many times traders do not reach their potential because they never come to a deep appreciation for their most basic strengths and weaknesses.  It is at the intersection of market knowledge and self-knowledge that traders can find their greatest success.

Further Reading:  Lessons From a Successful Trader