Dr. Brett Steenbarger, a trading psychologist and performance coach, talks about the psychology of trading and the common traits of successful traders.
High on the list of common traits of successful traders is their ability to process data quickly and, or think profoundly. The latter, deep thinkers, tend to make fine investors
“Great traders are either fast thinkers or cognitively deep thinkers” said Steenbarger.
“To think fast means rapid pattern recognition, it means looking at things broadly and seeing many things at one time” said Steenbarger.
“Thinking deeply means that you are gathering a great deal of information, a great deal of research and understanding things in more depth than the average market participant,” he added.
Common traits of successful traders are the ability to remain focused
“Both of those require sustained concentration, and they are different cognitive functions thinking fast and thinking deeply” said Steenbarger.
“There are people with both qualities, but it is an exception” said Steenbarger.
“There are portfolio managers who think deeply and generate big picture ideas but can also trade in short time frames increments he added.
“In general, people are what I would call traders or investors” said Steenbarger.
“The very successful market participant is either distinctively strong as a fast thinker or distinctively strong as a deep thinker. They are not average in both, they show some area of distinctive strength” he said.
Analyzing and processing information differently is also one of the common traits of successful traders
“What we find from very successful traders or portfolio managers is that they are either looking at distinctive information than others, or they are looking at different information than others, or they are looking at the information differently” said Steenbarger. “So, there is a uniqueness to their perception, their research, they are not playing the same game as the consensus traders” said Steenbarger.
Discovering a new edge to their trading is also one of the common traits of successful traders.
“So, a big part of their longevity is that they can find new sources of unique edge in their trading that others don’t find, that they don’t participate in” said Steenbarger.
So, for example, there was a firm that had satellite imagery of ships at the port. Some traders could distinguish the different ships, whether it be an oil tanker or cargo ships, they then could process the information, thereby forecast economic activity based on shipping activity at ports. Another trader would build a discretionary level of spending by phoning several hotels and car hire companies and ask them whether they offered discounts, and from that, they were able to build a discretionary level model of spending patterns six months in advance.
“It is playing a different game, creative thinking and putting data together in a different way” said Steenbarger. So, the common trait of successful traders is that they are finding trades that are not crowded.
Mentoring is another one of the common traits of successful traders
“Mentoring is the dominant path to success. So, chess champions grow by belonging to clubs, they receive mentoring, Artists also learn from the masters. It is the old master-apprentice concept with the same principles at play. “You are learning from the success and mistakes of others and it accelerates your learning curve” said Steenbarger.
Other common traits of successful traders include having emotional resilience, thereby treating losses as learning experiences
“Even the best traders are wrong 50% of the time” said Steenbarger.
Also, on the list of common traits of successful traders is that they understand the mechanics of trading, they pay attention to detail, and the different ways of structuring ideas into trades. Steenbarger recommends traders to develop their strengths and leverage them.
See the common traits of successful traders.