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What separates Tiger Woods from other golfers is Earl Woods. His father started training him before he could even speak. He was playing by the time he was two years old and he probably had more exposure to the game by the time he was 25 years old than most people have in a lifetime. Not to discount any natural ability he has, but would he have been the same golfer without his old man's guidance?
O.K. let me put it this way. You have this large sample of traders, and they all have the same skill-set. Good trade/risk management, discipline, knowledge about trading and trading techniques. They are all adequately and equally capitalized, have been trading the same amount of time and have been mentored by the same individual. Are they all going to enjoy the same amount of success, or is there going to be something resembling a normal or Gaussian distribution, with the immensely successful traders a couple standard deviations one way, the blow-outs a couple standard deviations the other way, and the bulk of traders at the mean?
I stood in the bond pit for 25 years with about 700 other traders, and saw literally thousands of traders come and go over that time period. I've been around traders every day of my life for close to 40 years, and I can tell you there is an amazing disparity in P&Ls, between the really successful traders and the merely successful traders. So what is it, that makes one trader more successful than another, all things being relatively equal?
Quite simply, it's a mental edge. Its part confidence, part pride, part drive, but make no mistake, I never met a really good trader that didn't possess these qualities.
I don’t doubt that not everyone can be equally successful and my intention was not to suggest that training was the only factor in becoming the best in one’s chosen field. Just saying there’s a tendency to ascribe something mystical or intangible to people that are the very best performers, when the factors that do make them the very best can actually be quantified and defined.
As you say yourself, the best traders you know all share a certain psychological make-up - they have the commitment, the confidence and the belief in their self-efficacy to succeed. No doubt at some point, they also received the right mentoring when they were still finding their feet in the markets. All that sounds very tangible to me, if not attainable. And while we can’t all be the best, I think we can all recognize what qualities make the best the best, strive to be more like them, and hopefully find a measure of success along the way.
Anyway, as a trader whose years of experience can be measured in the single digits, does not have much opportunity to mix with other traders, and is striving for greater consistency, I very much appreciate reading the opinions of people, such as yourself, who have been involved in the markets for decades. I hope you can tell us more about the common qualities you see in great traders. : ) Thanks.
Broker: Advantage, Trading Technologies, OptionsCity, IQ Feed
Trading: CL, NG
Posts: 1,038 since Jul 2010
Thanks Given: 1,713
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I think Tigertrader brings up an interesting point and perhaps an entirely different topic to discuss. I agree with his thoughts on this.
My post was directed towards the trader who is looking to make enough money through trading to live on. My definition of "success" therefore was to be financially independent and "eat what you kill" vs. being employed.
I believe that the term success has different tiers within it. There will be those that are somewhat struggling with their trading but just getting by (barely successful), those who are doing well enough to make a decent living and there are those who absolutely kill it and hit it big time. You could probably break it down more than that as well. But my original thoughts were of encouragement to the newer trader looking to find some synergy in what they are looking to accomplish.
And of course an obvious statement is if you're getting into this business with the thoughts of being the Tiger Woods of trading, just wire the money out of your brokerage account right now and walk away. The is the worst mind set to have. Success like that comes over many many years of getting your butt handed to you.
Here's the thing with a majority of successful independent traders, you'll never know of them. These "successful" traders have a specific routine every day. They make their trades following the predetermined rules and they're done. They don't announce to the world of their success. They don't post the p&l online, etc. They don't give away their edge. They just do their "factory work" every trading day/week/month and are happy to do so and live on with life.
But to the point of what separates the ultra successful traders from the pack is something that comes from a lot of blood, sweat, tears, determination, crazy natural ability and most importantly 100% confidence and belief in themselves through their past experiences in trading and developing a winning edge. These traits can be found in every truly successful person alive. This is something every trader should strive for but it takes a lot to get there.
Going back to the topic of this original thread, you are successful if your primary source of income is from your trading gains and you are living a sustainable/normal lifestyle. Anything on top of that is a bonus...
I have to throw this out there because I have been thinking about it a lot. Just a personal theory.
I would suggest that every new trader has a run of 'beginner's luck' - but it's not so much luck as much as approaching trading with the most objective and care-free state of mind they are going to have for quite some time.
I don't know about everyone else, but I dove into trading, signed up for an account, started looking at charts and went for it. Trading is dreadfully simple. Buy when it looks like things are going up and sell when it looks like they are coming down. I tripled my account in 2 weeks. Pfft. The next week I loss 50% of the account value over the course of two days.
Then the journey began - books, indicators, backtesting, patterns, mental anguish, pulling my hair out, quitting, starting, quitting, etc, etc.. Everyone knows the drill.
The latest iteration has seen me hard at this thing for about 18 months. Someone convinced me to go back to sim trading about 4 months ago. Yes - supposedly 'this-doesn't-count' sim trading.
Surprise.
I was completely taken aback by how emotionally attached I was to the process, to the SIM process: about being told I was wrong, about taking market action personally (the market was out to get me - and only me - yes - while SIM TRADING), about how much fear and greed I still felt. Emotionally overwhelming and exhausting. Amazing.
Only now I can work thru all of this for the monthly cost of data feeds. (And yes, I would recommend paying for data, I tried the free (no monthly fee brokerage account) route and it is just not worth the hassle)
This was without a doubt the best decision I have made in my trading education (along with Mark Douglas and Bankrobber - Ok - and some futures.io (formerly BMT) for good measure =)) I feel like I am finally getting to the place of some objectivity - understanding myself and my tendencies and biases and how to handle them, honest and patient self-critique, identifying, defining, and refining something of an edge. I feel like I am getting back to where I started.
The first three weeks of my trading were probably some of the best trades I will ever put on. I had no idea what to expect and I was willing to part with my initial investment. I try to imagine what would of happened if I would of stumbled across someone that would of recognized, protected, and nurtured that first naive, unexperienced, and untarnished approach. The time, energy, and money that would of been saved. Heh.
For the record, NT lists about +-150 trades a day; as I can't seem to get NT to fill the entire order at one time every time, this probably means about 100 trades a day. Perhaps total number of sim trades is somewhere north of 1000.
And for what it is worth - I do not understand why or how sim trading has had this kind of an impact on me. I was fully persuaded that sim trading was just not enough to prepare for me live trading. I had tried it in short and sporadic sequences, usually less than a day. It didn't seem real enough, and I would quickly give it up. Maybe the attachment came by losing enough real money or with all the energy invested in trying to find the holy grail. Maybe I needed to beat my head against the wall enough times. Heh.
If someone has similar thoughts with respect to sim trading and is struggling with live trading, I would recommend that they commit to sim trading for a month to see how it goes. Be ready to face your inner demons.
As someone told me - 2 years spent sim trading is nothing to invest compared to the potential reward. Look at any other profession - think about what you did before you decided to pick up trading - how much time did you have to spend to gain some level of competency in your prior (current) career? Trading's ROI is mind boggling - infinitely scalable (nearly... well, how can anything be near to infiinity... - ok - its as close as we can get ).
Commit to and put in the time for proper training.
Phew. A little longer and probably more passionate than I intended - but hey - the hardest lessons always make it so.
Thanks for sharing @Day Trading Fool. Also, I really like your signature quote: "An expert is a man who has made all the mistakes which can be made, in a narrow field."
In my limited experience live trading, It seems to always boil down to one thing. Your mental strength.
Can you take AND hold on to the trade you've taken a thousand times in practice and know works
most of the time.
The 95 to 5 ratio is undoubtedly correct.
So... It boils down to this. Do YOU believe you are a 5%er? Have you always tried harder than everyone else?
Here is my breakdown....
The first 75% - You mean I'm going to have to study? I need to read books? Man, this is too much like school..
I'm out. I thought this would be easy money...
The next 10% - I will study my brains out and learn it all!! Oh wait, I have no guts... I am not fearless...
I'm out
The Last 10% - I can't seem to find a balance between all the immense knowledge I have gathered over the last couple of years and the simple ability to pull the trigger at the correct point in Price Action.
I am always at break even. This is taking too much of my time.
I'm out
Are you a 5%er?
Have you always felt like a 5%er?
Are you fearless?
Are you smart?
Can you study like you're a Freshman in College looking for a Masters in Trading?
Can you remember every mistake you have ever made?
If so, you have nothing to worry about. You have been ahead of the curve your whole life.
People simply don't realize what they are getting into...
Don't know about actual percentages but the reasons are pretty much true. As I get to speak to many traders, successful and failed here is what I see:
Your first reason 75% - Right on! Unfortunately there is so much garbage on the Internet with promises of quick riches, this group bites on the junk then falls by the wayside rather quickly. I was one of this group! The difference was I had a background in trading stocks, no load mutual funds and options. So while it "seemed to be great" to be on the golf course by 10am, I never truly believed it. Folks, this takes time! And a lot of it!!!
Your next 10% - Right on.
Your third 10% - Correct due to mostly three reasons: A) a flawed system to begin with; B) A system which is good but the rules are NOT explicitly followed which takes discipline. A sound system which makes money over time will continue to do so if you follow the rules (sometimes hard to do but an absolute must); C) inability to pull the trigger due to, as you state "mental strength" which is actually defined as - unemotional trading . . . sometimes very hard to do!
To quote you: "Can you study like you're a Freshman in College looking for a Masters in Trading?" This is what I share with all traders starting out. It never ceases to amaze me (now anyway after many years) how we all accept to become a professional in anything, doctor, lawyer, any professional field; it takes years of study and hard work. Yet because somebody selling a system for $295 says you'll start getting rich in as little as a week when that week doesn't happen it's "oh well I tried". No they have not tried. Again, trading is a profession which takes time, study, money management, focus, discipline.
Currently I believe I have gained a wealth of knowledge. But I don't know if I want to be a ER doctor, family practice, surgeon, etc. I have read about price, volume, moving averages, Gann, Fibonacci, HH,LL. I can look at a chart and see it. What I have not determined is am I a positional trader, scalper, swing, etc. The good part is you have to know your goals. First goal is obtain the knowledge. Second goal is to test it practically. Third goal is to learn your psyche. Once those three are met, go live and try it. I am between my second and third goal. I started a journal to see how I do at Fibonacci positional trading. What my tolerance is for good risk to reward. Next week I plan on switching to a scalper setup. Each day documenting how I handled the day. Bad risk to reward. But I want to test my psyche. Then after that test another setup. I will know my limits and at that time be prepared to move to that 5%. But it does require a lot of time. My wife picks on me saying "if you got paid for the amount of research you do, we would be rich". I am not looking to get rich. I am looking for consistent profits. That is where my goals will come together. Knowledge, Style, Mental ability. They all have to mesh. They are not there yet, but soon.
).
