Trait 1: Personal Responsibility.
I think the most important trait that all top traders have (or top people in any field) is the ability to assume total responsibility for what happens to them. And for top traders and investors, this means that they assume total responsibility for their investments results. This means that if you lose money it's not the market's fault, it's not your advisor's fault, it's not your system's fault, or the fault of anything else. Instead, it is a direct result of what you did. When you assume this attitude, you can learn directly from your mistakes and trading becomes a big university setting which constantly allows you to improve. When you don't assume this attitude, then you get to repeat your mistakes over and over again because you believe that you were a victim of some external forces. Which would you rather have – the ability to learn from your mistakes or the tendency to repeat them over and over again?
Trait 2: Commitment.
Becoming a successful investor/trader requires hard work. You must get to know yourself intimately because you are the source of your trading performance. You must develop a business plan to guide your trading. You must develop and test three or four strategies that fit within the big picture (as you see it) and then become part of your business plan. You must do your homework every evening. You must follow certain disciplines during the day that we call the ten tasks of trading. And all of this requires a lot of time and energy. And in my experience, it is only the people who are really committed who will put in the work necessary to become successful.
Trait 3: Mental State Control.
I'm both a coach for traders and a modeler of top trading behavior. As a coach I help top traders follow the fundamentals (some of which I'm outlining here). And as a modeler, I determine what top traders do in common and those qualities actually become the fundamentals that I teach. For example, there are ten tasks of trading that I expect each of my clients to follow every day. But the key to following those tasks is mental state control. Each task requires a particular mental state in order to execute it properly and you must have the skill to step into that state and perform the task.
For example, one of the ten tasks of trading is the action step of pulling the trigger. The mental state required is 100% commitment to action. There is no thinking involved, just 100% action. You should already know what to do when you get this signal because you've already developed a system that works. Thus, your job is simply to act. Think about when the tiger starts to leap on the antelope. He doesn't suddenly think to himself, "Is this a good idea?" If he did that, he'd probably miss the antelope and break his back. No, his mental state is 100% commitment. Well, each essential task of trading requires a particular mental state and you must have the ability to step into that state.
Trait 4: Top-Down Discipline.
I'm in the process of developing a new workshop entitled "17 Steps to Becoming a Great Trader." One of those steps involves developing top-down discipline. In developing this sort of discipline, you must go through the following steps:
- Write out your dream life. What would you like to be, do, see, experience, and have in your lifetime in order for it to be ideal? Write this out completely.
- Write down the purpose behind that dream life. Write down your mission, your purpose and all of the whys behind that dream life. This step helps you get excited about achieving it.
- Write down your goals for the next year.
- Write down the purpose for each goal.
- Write down a series of action steps for each goal.
- And each action step (if it takes longer that a week for you to finish) could be considered another goal with a purpose behind it and a series of action steps behind that.
The net result of following these steps is that you develop a top-down discipline that helps you develop commitment and achieve almost anything you set your mind to achieving. Now let's look at what we have in these four qualities.
First you have a top down discipline that really helps you achieve almost anything you set your mind to achieving. Next you have the ability to get yourself into the appropriate mental state to do whatever you need to do with excellence. Third, you have the commitment to see your goals through to the finish. And lastly, but remember that I mentioned it first; you believe that you are personally responsible for what happens to you – which means that you can learn from your mistakes.
Now, don't you agree that with these four qualities, you could achieve peak performance as a trader or almost anything else you set your mind to doing?
Van K. Tharp, Ph.D.