Qualities shared among the best traders

By: Dr. Steenbarger

source: http://traderfeed.blogspot.com/2009/12/what-i-see-among-many-of-best-traders.html


Here are four qualities I observe among winning traders and portfolio managers. These can be great areas for self-development in the coming year:

1) A creative way of looking at markets, and a way of creatively resolving conflicting market views;

• Traders are familiar with the feeling of "rightness" that accompanies a gratifying synthesis: suddenly, out of the welter of data, there is clarity. It all comes together, and the trader experiences an intuitive "feel" for what is likely to happen.
• fear and time pressure hinder the creative process. Time pressure stifles creativity because people can't deeply engage with the problem...Creativity requires an incubation period; people need time to soak in a problem and let the ideas bubble up.
• Many active traders underperform because they act before observation/analysis has an opportunity to crystallize in a creative insight.

2) The emotional resilience to re-enter a trade idea after being stopped out, when subsequent action confirms the initial view;

• You don't gain resilience by winning. Rather, you become resilient by losing--and by seeing that you can learn from (and overcome) those losses.
• One manifestation of emotional resilience is persistence: the ability to stick with a good idea, even when you get stopped out. Stopping out of a trade when it goes against you is a sign of discipline and is part of good trading. But sometimes we get stopped out and the underlying trade idea is still valid.
• Persistence is different from simply being pigheaded and sticking with a wrong opinion. Rather, persistence means that you don't give up on an idea if market action comes back to confirm your view.
• Just because you lose your position does not necessarily mean that you should lose your view.

3) The courage to bet large when there is high conviction in an idea; the prudence to control risk when that conviction is lacking;

• The successful trader has a high degree of conviction in his or her ideas, simply because of the accumulated base of experience that show how those ideas work out. - through repeated practice
• That conviction enables the expert trader to press an advantage when it's present and hold onto a good position even during a drawdown .
• What gave our trader the courage of his convictions? Perhaps simply this: his way of viewing markets had become his own
• The great traders, however, have a feel not only for markets, but their own convictions. That keeps them in the market to make the large profit.
• It's how you meld the ideas of others with your own long, hard-won experience that gives you convictions--and the courage to stand by those.

4) An insatiable desire for self-improvement that builds a deep, internal sense of confidence.

• Identify and build upon strengths--including strengths that might be overlooked. No one is wholly dysfunctional; we do not fall into problem patterns all the time. Observing what we're doing when problems are *not* occurring often leads to solutions that reflect hidden strengths.
• whether a trader works on goal A or goal B may be less important than how he or she works on those goals.
• traders tend to set goals, but tend to be lax in structuring their work on those goals. How we pursue self-improvement is every bit as important as the ends we seek.