The New Trader Psychology: Are Great Traders Born? Part 2

10/24/2017 6:00 am EST

Focus: STRATEGIES

Jake Bernstein

Publisher, The Jake Bernstein Online Weekly Capital Markets Report and Analysis

In this second of three parts, I will attempt to give you an overview of how important behavioral economics is and how increasingly important it will become to all of us who trade and or invest,  writes veteran trader Jake Bernstein.

Are great traders born great?

Are bad traders born bad?

Is successful trading a learned behavior or an inherited behavior?

Is there a good trading gene?

To suggest that the ability to trade successfully is in any way related to genetics is socially, politically, and scientifically taboo.

In today’s hyper-vigilant social environment suggesting that genetics is in any way a factor in investing and/or trading success is a slippery slope that is best left untouched. That applies to so many other fields: sports, or in engineering or banking. It is indeed the hottest of today’s hot buttons!

Let’s explore some of the topics that are relevant to what I call the new trader psychology. Read part one of this series here.

On the other hand, scientists are quick to point out that genetics play a powerful role in diseases. It is becoming increasingly obvious through scientific research that cancer, for example, has a strong genetic component, even stronger than heretofore believed. Gene-based therapies are the future of medical treatment.

In common parlance terms such as “he’s a natural at the game” or “he was born to do this” or “she comes by that talent naturally” are veiled references to genetic predispositions. 

We are daily bombarded by ads for ancestry.com and the MeAnd23 home genetics test kit. A middle-aged man, dressed in German style lederhosen appears on the genetics test kit television commercial proudly explaining “I thought I was German but my genetics test shows I’m really from Scottish ancestry so I traded in my lederhosen for kilts”. And voila…he’s dressed in a kilt!


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Imagine this: an unsuccessful trader decides it’s time to take action to rectify the situation. He makes an appointment with the doctor. Together they conclude he needs to be on medication. What kind of medication? Not a tranquilizer or a mood elevator but rather a pill that will change his losing trader gene and morph it into winning trader gene. It is unlikely that this will happen.

However, there are few things that are clear at this juncture.

  1. Unless it can be demonstrated definitively that there is a successful trading gene or that success in trading is somehow genetically passed on from trader to trader, we must assume that successful trading is a learned behavior.
  2. If this assumption is correct then the next logical conclusion is that success in trading can be learned.
  3. If this is true that success in trading can be learned then it follows logically that it can be taught.
  4. If success in trading can be taught then we need to know how to teach it

In the next article, I will share some ideas with you about a point number four can be achieved.

Trade well and prosper!

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