Do What Elite Traders Do

Everyone who knows will tell you that trading is mostly about your personal psychology, your state of mind. Some would say as much as 90 percent contributes to your success or failure. This makes sense as with any high-skill endeavor, like competitive sports or thinking games like chess, all depend upon a high level of cognitive ability. But it’s more than that.

We are going to look at the areas that have shown through extensive research of elite traders to be associated with success, by renown trader psychologist Dr. Brett Steenbarger.

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The most successful traders approach trading as a performance activity. He/she is always working on their game, always reviewing performances, always doing things to improve themselves, pursues their craft in a performance manner. The successful trader is always working on their game.

The term that Dr. Steenbarger uses is Deliberate Practice, where every performance is treated like a practice, where we learn what we did well, what we didn’t do well, and keep setting goals, keep improving what they practice.

The common thread with elite performers is that they actually spend more time working on their skill and performance, than they do actually performing in competition.

Whether it’s a professional athlete or a ballet dancer, billiards player or a musician, they all spend more time in preparation than they do performing.

Most traders spend a lot of hours in front of the screen trading and very little time reviewing their success or mistakes, so they never really understand themselves so they never end up developing themselves.

If you’re going to take a proactive approach, then it’s very important that you review both your positives and negatives, so that you can build on what works and either eliminate or improve what doesn’t work.

If you claim you have a passion for trading, Dr. Steenbarger would say that your “fucked.” Seriously, your focus is on the wrong thing. Successful elite traders have a passion for markets and mastery of those markets, working on their game. It’s a passion for the process. They know by perfecting the process is the only way forward and towards becoming a consistently profitable trader.

According to Steenbarger, successful traders make it a habit to setup processes that all end with a review, for the purpose of reflection and continuous improvement. They set up processes for preparation before the trading day, processes around research, processes for managing trades, processes around journaling or recording their activity for daily review and longer term analysis.

They also socialize to cull ideas, talk to knowledgable people and put that together into some form of a tentative game plan that may eventually incorporate into their daily activity. I like to call this a strategy factory. This is a separate process from the others, that is in constant motion, feeding into your big process new setups to try, new process steps to incorporate, and efficiencies to realize.

There’s a process for preparing for the coming trading session, kind of like an athlete psyching himself up, where they mentally prepare themselves, get in the right frame of mind, mentally warm up. And it all starts with a bigger process that enables that startup process, they get a good night sleep, are well rested and they are in physical shape to keep the blood flowing. You could substitute process with habit, and probably should, because these steps need to be ingrained into your self…you should probably have a habit-building process.

There’s a huge movement by elite traders, taking to the gym, they’ll work out in the morning, or do meditation or a combo of both in an exercise routine involving yoga. It clears their head, gets them focused. There’s substantial research that vigorous exercise, or aerobic workouts, is transformative on the brain, and will actually make you smarter.

There’s a great book on the subject written by Dr John Ratey, called Spark – The revolutionary New science of Exercise and the Brain. Through exercise you can become A better trader, or at least be better prepared by beating back stress, lifting your mood, fight memory los, and sharpen your intellect.

This is all part of a process, a series of habits that are repeatable, anyone can do this. On the backend there’s the review, another important characteristic of the elite trader. Again, a series of well developed habits designed to close the feedback loop.

The review is all about doing an in-depth retrospective, and to develop goals. But goals are not enough, in order to achieve those goals you need to develop a plan that ensures your success. These plans, the habits, the process, for elite traders on trade desks are scored by their managers, their mentors, and sent to people like Dr. Steenbarger so that they can keep the trader accountable and to encourage them to continue working on their game.

We present all these things and more, much more, in our course, the Trader Master Class with specific exercises and homework to get you started on your own process of self improvement towards becoming a better trader.

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