Photo: Wikimedia Commons
“My style on the chessboard was a direct expression of my personality.”And then:
“I believe that one of the most critical factors in the transition to becoming a conscious high performer is the degree to which your relationship to your pursuit stays in harmony with your unique disposition.”
These quotes are from The Art of Learning: An Inner Journey to Optimal Performance by Josh Waitzkin, former chess and presently martial arts champion. We can learn from Josh’s lessons as an elite performer as traders. How do we find a trading style that fits our personality?
In One Good Trade I wrote about Mad Max who craved momentum stocks. Mad Max was a former elite wrestler and all-around lover of things aggressive. Aggressive individuals may find they enjoy trading momentum set ups. They should find more of them. But they must also recognise their limitations due to their disposition. They must learn which momentum set ups offer excellent risk/reward opportunities for them and which offer too much risk for the potential upside.
One of our senior traders loves to measure his trades. He doesn’t believe in a trade unless he can understand its probability of success. Well trading does not quite work like this all the time. Each trade requires an understanding of the present psychology of the marketplace. That trade he thinks he can measure the probability of may be based from markets with different psychology. Sometimes you just have to be able to play and love the chaos (think 2008, 1998, 2007, 1999, 2000). So this trader should crush the trades he can measure but accept that things don’t always make sense and adapt in these unique markets.
Another of our senior traders is ultra laid back. He likes for his plays to develop. He trades them with size but he prefers the slow movers. Forcing him to trade momentum would make no sense. He should focus on his best set ups that match his personality, trade more of them and work to trade them with more size.
One of our former traders was always the smartest guy in the room. He loved fading stocks. This fit with his superior intellect. He was smarter than most in the market thus fading outsized moves. The problem was he only faded. He faded everything and was unable to pass on the super strong and weak stocks which should not be faded. They are unlikely to reverse. He was unable to focus mostly on fading but understand that his personality was causing him to overfade.
We have had traders move to hedge funds because intraday trading was not intellectual enough for them. This was the right move for their personality.
I come from a very stable, safe, responsible home where I was unconditionally loved. I like order. I tend to be able to trade just about any set up but I can struggle with taking on too little risk. So for me I must always be careful to add risk to my positions when appropriate.
Also I most enjoy helping others. When I play basketball I would rather pass than shoot. And thus it is best for me to use my talents as a trading teacher than as a trader.
We are all different. We must understand our natural disposition. Then we should consider how our personality impacts our trading. We should find the plays that match our personality and then focus on trading more of them. We should understand the limitations our natural disposition imposes on our trading and find solutions to improve.
One last note for developing traders. You must first build a solid foundation. Learn and experiment with many different set ups. Then you can gravitate towards the plays that fit your personality.
Author, One Good Trade