Three Steps to Becoming a Great Trader

06/16/2014 8:00 am EST


Gary Dayton


Nobody is "born" to be great at any chosen skill, trading included, says Dr. Gary Daytonof Here are three key components that come together to create success and can help you reach your full potential as a trader.  

Many traders may believe that the reason success eludes them is due to their natural talents. They may think that their level of intelligence is not quite adequate, or their personality make-up, perceptual ability, temperament, or other inborn traits are somehow lacking. But the reality is that such characteristics have little to do with how successful a trader you can become. Although certain inherited characteristics may be helpful and others may pose challenges, our innate qualities in and of themselves do not determine how good we become at trading or any other performance activity. Take sports, for example: Although body size becomes relevant, this is the only natural characteristic that matters in athletics. Natural talent-or the lack of it-has little bearing on how great an athlete becomes. The same is true with great traders.

A Look at Michael Jordan's Talent
Two events from Michael Jordan's athletic career serve to illustrate that natural ability has little to do with athletic achievement. Surely, I must be joking, you may be saying!  Let's take a look at "Air" Jordan, one of the all-time great basketball players. 

Jordan played basketball from an early age. In high school, however, Jordan was cut from his varsity team in his sophomore year. His natural athletic talent was not good enough to secure him a place on the team. Like all great performers, he used that event as leverage for accomplishment. He set himself the task of earning a place on that varsity team and worked hard at practice, many hours a day, day after day. "Whenever I was working out and got tired and figured I ought to stop, I'd close my eyes and see that list in the locker room without my name on it," Jordan said, "and that usually got me going again." He eventually made the team.

The second event in Jordan's career was when he quit basketball to play baseball. He signed with a White Sox AA minor league farm team in 1994 and played for about one year. Results were an unspectacular batting average of .202 and other low performance stats. Clearly, Jordan's natural athletic talents did not make him a great baseball player. 

What Makes a Great Trader?
Over the past 35 years, much research has gone into the question of "What makes an extraordinary performer extraordinary?" The answer consistently has been something other than natural talent. Extraordinary performers from many fields have been studied, including high-caliber athletes, musicians, chess players, investors, medical professionals, and many others. The results are always the same; talent is truly overrated.

What makes a great performer great includes three things:

NEXT PAGE: The 3 Steps


A Long Period of Practice
Regardless of the field, those who reach great heights spend a lot of time practicing their craft. To reach elite, international levels of achievement, it takes about ten years of dedicated effort. Competency and profitability can come earlier than this, but levels of world-class trading would take longer.

At a recent seminar, noted trader Linda Raschke said that one of the primary reasons most traders fail is because they underestimate the time needed to learn and develop trading skills. It does take time, and also a certain kind of practice.  Psychologists call this special kind of practice deliberate practice or deep practice. It is a high-quality and intensive practice that is sustained over many months and years.

It is not enough, for example, to know a trade set-up. The real secret is to practice that trade set-up in all different market conditions and situations.  Focusing on that trade set-up during repeated sessions of simulation or bar-by-bar replay can give the trader a deep understanding of the market context in which that trade set-up works best. He or she will learn the nuances of the set-up, not just for entry, but also while the trade is on, which includes the nuances of trade management and exit.

Training and Coaching
Top performers in every field study their craft diligently, and most have a coach, mentor, and/or trainer who help them develop their particular skills. A music prodigy learns the foundations of music and is then shaped and trained by their teacher(s) until they reach high levels of excellence.  Professional tennis players work hard with coaches in developing weapon-like strokes, mental toughness skills, and winning game strategies. A skilled lawyer is usually mentored by a senior attorney. Traders, too, can benefit from careful study and working with coaches on both technical and mental skills.

There are probably thousands of training courses available to traders. Some are excellent resources. Traders should select their training with care and make sure it meets their needs. As the research on deep practice is now becoming more available to the public, training courses that incorporate deliberate practice procedures are beginning to emerge. These may be of particular interest to traders as study and training are guided by scientific principles.

Working with a skilled coach or mentor can help a trader build all-important fundamental skills, as well as skills tailored to the trader's individual needs. The specialized knowledge needed for trading may be learned more rapidly and in greater depth with a qualified coach. A knowledgeable coach will also help the aspiring trader develop routines for deep practice. Whatever option selected, be sure the coach is qualified and can teach you the method(s) you wish to learn.

All extraordinary performers have support from family and friends, as well as the specialized support from coaches and mentors. Traders have a definite need for support. For most, trading is a lonely business. Trading alone all day is difficult, at best. It helps not only to have family support, but also support from like-minded friends who trade. A trading buddy or two can provide valuable relationships as well.

Internet forums and trading clubs offer ways to connect with other traders. A dual benefit of both support and knowledge development can be found in these organizations. Many offer educational programs and invite expert traders to share their knowledge. Most trader communities invite a broad range of trading styles, so it is easy to become distracted. Look for traders in an online or offline community who share a similar method as yours. You also want to find like-minded traders who are interested in learning from each other and who can inspire one another. In a way, you are looking for the same qualities found in a dedicated sports team where the team camaraderie serves to support each member in their individual development.

Of the three elements that lead to success listed here, it is the consistent, high-quality practice that is the most important to a trader's development. Use a daily practice routine to acquire highly specialized trading knowledge, skills, and abilities.  Reaching high levels of success comes not from your genes, but from your effort.  As Albert Einstein once said, "Genius is 1% talent and 99% hard work.." Achievement comes from the hard work of deep, deliberate practice.

By Dr. Gary Dayton of

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