■ Adaptability. To a person, the best traders were adaptive and flexible. They were sensitive to market environments and altered their trading to fit changing landscapes. Often, they would quickly alter their risk exposure, sensitive to occasions when market action did and did not confirm their expectations. Even more broadly, they adapted to changing market regimes by learning new skills, broadening their trading universe, and reworking their analytics. What made them successful was not merely that they possessed a trading‘‘edge.’’Rather,they had found ways of continually honing and expanding that edge.
■Creativity. The ideal for any trading firm is assembling a group of traders,each of whom delivers superior risk-adjusted returns in a relatively uncorrelated manner. Thanks to the power of diversification, that provides the business with a relatively smooth equity curve and allowsittoleverageitscapitaleffectively.WhereverI’veseensuccessful trading firms, I’ve encountered creative traders: ones who view markets uniquely, find original ways to generate ideas, and express their views in fresh ways that maximize reward relative to risk. Indeed, I would venture to say that I have never known an extraordinarily successful trader who was not extraordinarily original in his or her approach to markets. I refer to such traders as ‘‘idea factories,’’ as they develop robust routines for detecting opportunity where others see none.
■ Productivity. My experience confirms the findings of Dean Keith Simonton’s seminal work on greatness: The elite performers generate better ideas because they generate so many ideas. Their hit rate is not necessarily unusually high, but they go to bat so often that they get their share of good pitches and hit their fair share of home runs. Knowing that their strength is processing information and generating ideas—not just holding any particular idea—they are willing to toss aside less promising trades and hold out for truly exemplary ones. This productivity is readily apparent on a day-to-day, week-to-week basis: The greats simply get more done than their colleagues. They organize their time and prioritize their activities so that they are both efficient (get a lot done per unit of time) and effective (get the right things done). How much time do we typically waste as traders, staring unthinkingly at screens, chatting with people who offer little insight, and reading low-priority/information-poor emails and reports? The successful traders invariably are workhorses, not showhorses: They get their hands dirty rooting through data and make active use of well-cultivated information networks. They realize that higher-quality inputs will yield superior outputs.
■ Self-management. I can think of few vocations that blend risk and uncertainty in as immediate way as trading. In many lines of work, good enough is good enough: Slipups are rarely irreversible or fatal. In financial markets, good enough is the expected, the average; it’s not what producesoutstandingresults. Maintainingfocus,optimism,andenergy level during periods of drawdown is not easy. Nor is it easy to attend to life’s many responsibilities when focused on fast-moving markets. Successful athletes realize that only very high levels of conditioning will allow them to deliver their very best performance. For traders, the conditioning is cognitive as well as emotional. Successful traders I’ve known work as hard on themselves as on markets. They develop routines for keeping themselves in ideal states for making trading decisions, often by optimizing their lives outside of markets.
Working with traders on a full-time basis, immersed in the daily realities of trading performance, has provided me with a front-row perspective on trading success. My overarching conclusion from years of coaching effort is that what makes traders good are best practices—sound methods for deploying capital and managing risk. What makes traders great are best processes: detailed routines that turn best practices into consistent habits. Adaptability, creativity, productivity, and self management: These aren’t just things that the best traders have. They are what best traders do—routinely.
The most important review you can conduct is not one of the research literature, but of yourself. If you place your best trading under a microscope,you ’llinitiateyourownreviewandthechancesaregoodthat you’ll observe how you best adapt to change, innovate, stay productive, and manage yourself. It is difficult for us to appreciate—especially during times of drawdown—that at some times, in some ways, we already are the traders we hope to become. Our task, in markets as in life, is to uncover the practices and processes that enable us to more consistently tap into the best within us.
Very few challenges are as noble or rewarding as fully becoming who you are at your best. Let the journey begin!
Brett Steenbarger
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