Monday, June 11, 2012

Are Successful Traders Born or Created?

The question of whether successful traders are born or can be trained has been debated extensively. Essentially, it’s the old argument of nature versus nurture. In the trading realm, books have been written and movies made surrounding this theme for many years.

Some of you may have seen the movie "Trading Places" in which two well-heeled owners of a commodities brokerage firm (The Duke Brothers) place a $1.00 wager with one another on whether they can turn a street-smart petty criminal into a successful trader. The result is a very funny movie which has become a cult classic among traders.

In the print category, "The Turtle Traders" have been written about at length both in articles and in several books. Similar to "Trading Places" the movie, "The Turtle Traders" started as an experiment by legendary trader Richard Dennis who (unlike most of his trader colleagues) firmly believed that with the right psychological traits, he could turn ordinary people into consistently profitable traders. As it turns out, the experiment produced spectacular results as the majority of those chosen went on to become wildly successful in their own right.

Being a trading instructor obviously puts me in the camp that believes successful traders can be created. My job is to create as many as possible. Still, it does help to have some innate characteristics suited to the profession one is pursuing. We sometimes hear the statement "He/she is a natural," or "He/she makes it look easy" when referring to a person that seems to execute flawlessly. This is more the exception rather than the rule, though. Most people have to exert lots of effort in their pursuit of achievement.

An aspiring athlete, as an example, might have great physical abilities such as being able to run very fast or jump very high. However, without the proper training, experience, and most importantly, motivation, that person can never reach the pinnacle of success. The person with less athletic prowess will indeed have to work harder. But with more focus and drive than his more talented counterpart, he’ll have a better chance of succeeding.

When I think about the common traits I see among consistently profitable traders, the most obvious one is that they’re all risk takers. I’ve never met a successful trader that was timid about risk. That’s true for most any performance endeavour, whether it’s professional athletics or entrepreneurship. I’ve also noticed that many professional traders are either musicians or writers at some level. I happen to fall in this category. If you think about it, both writing and playing an instrument require some of the same discipline that’s needed to trade well. Reading a music score is very much like looking at a price chart, while writing requires self-discipline and is done in complete solitude very much like trading. In the same vein, most pro traders are very comfortable being alone. As we know, trading can be a solitary business and it helps if you’re not bothered by being alone. Incidentally, many of the students I encounter at Online Trading Academy possess these characteristics.

If you’re reading this, and thinking to yourself "Well, I don’t like taking risk; I don’t write, I’m not musical, and I hate being alone," does that mean I can’t be a successful trader? Of course it doesn’t. Just because you don’t have any of the qualities mentioned above doesn’t necessarily mean you can’t succeed. There are traders that compensate with other strengths that contribute to their winning. Very few people have the "ideal makeup" to perform optimally in any undertaking. These people are the prodigies or virtuosos in their fields.

When I teach, one of my goals is to narrow the gap between a student’s strengths and weaknesses in the hope that this produces the performance edge (results) that are sought after. If you’ve been reading the Lessons from the Pros articles for any extended period of time, you’re getting weekly ideas, strategies and models to emulate which come from the collective years of experience of our trading instructors. These, along with classroom experience and the Extended Learning Track (XLT) course at Online Trading Academy, are great resources in the making of Professional traders.

So no, you don’t be have to be born with a successful trader gene to be a winner. Consistently profitable traders can be made. With the right attitude, discipline, hard work and perseverance, anything is possible.

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