Successful Traders Possess Key Traits that Separate Them from the Herd
By Matt Blackman, CMT
Ever wondered if you have what it takes to be a really great trader? Your answer may be just around the corner.
Famous commodities trader Larry Williams and his son, Dr. Jason Williams, who studied psychiatry at the John Hopkins School of Medicine, have teamed up to document exactly what traits separate truly great traders from the rest of us. Due to be published in the fall of 2012 by McGraw Hill, the book specifically explores personality trait differences between extremely successful professionals and average traders. It identifies what personality characteristics are most important in determining our success or failure in this business. According to Dr. Williams, although there are many books that examine trader psychology, this is the first book of its kind to explore how personality traits work to either help or hinter trading success.
Stock trader Dan Zanger, the host of ChartPattern.com and author of The Zanger Report newsletter, was invited to participate as part of the highly successful group of traders studied. Zanger holds the stock trading record with an annual audited return of more than 29,000%. Every year Dan holds his annual ChartPattern.com seminar where traders learn first hand how he does it.
In the detailed 270-question NEO-PI-R personality test developed by two psychologists, traders are asked questions on a wide variety of topics. But the questions provided little insight or guidance about what the test was attempting to achieve, according to Zanger.
“The questions were somewhat contradictory. For example, one question asked if I liked bright colors and flashy items. I like bright colors but don’t like flashy items so how do you answer it? But it was certainly detailed and it will be interesting to see the results,” Zanger commented.
According to the Williams, the NEO-PI-R test is the most developed, validated personality test utilized by researchers and doctors. Questions may seem contradictory but they are carefully worded to probe specific traits in such a manner that make it virtually impossible intentionally influence the outcome.
We talked to Zanger about the test and characteristics he feels are essential to trading success. His answers provided valuable insights into how he trades and what helped him become and stay successful in this business.
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Matt Blackman: “Do you think it’s worth the time and money for traders to take a psychological test to learn what their strengths and weaknesses are before they start trading?”
Dan Zanger: “It is essential that traders understand the strengths and weaknesses that they bring to the trading table if they want to make money. Since the Williams’ book focuses on trader psychology, it provides a lot of insight about what the test will tell you.
In my experience, there are traders who are determined, focused, dedicated and passionate and there are those who want to be successful but don’t want to do the homework, don’t want to or can’t focus and they just don’t have the mental tools or mental fortitude necessary. But even if you have the focus and determination, without the ability to see patterns, it’s impossible to do what I do. So there a many different factors essential to being successful.”
15 comments:
This is off-topic, but it does concern something that's been brought up on this blog before -- diamonds! It also involves Australian miners, cartels restraining trade, Russia, Canada and some other topics that interest Hivers. Bonus points -- it comes from a sex-related blog! Why diamonds are not a good investment...
Bukko, great minds think alike! I read that one yesterday...found it via one of the links on the left sidebar.
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Queenbee - nice article you posted here.
"there are traders who...can’t focus and they just don’t have the mental tools or mental fortitude necessary."
-That's Mammoth in a nutshell!
I really liked this article as soon as I got it from Shaza. Kind of brings us back to what The Hive's intent originally was. To teach us better trading and also to realize our weaknesses.
Good story Bukko as I knew most of this already. I think I watched a documentary about how the De Beers kept a tight hold on the entire market for years. I also got a little excited about them and that waned. Trade what you know and I know nothing about diamonds.
Obama step in manure again as seen over at Jesse's Cafe. The man is determined to scale down Afghanistan and then take on Iran IMO. He would rather control it that let Israel muck it up. Just goes to show that we are the enemy. It's our way or the highway.
And of all the countries pointing fingers at another for Deceptive Financial Practices his first sentence sums things up.
I think this article explains why I am not a trader OR feel comfortable by 'betting' the market. It is also why, for the most part, I look for older companies with older traders.
Now, they may 'miss the boat' on the next Facebook, BUT they have been around long enough to have seen MY SPACE, etc. who have come and gone (so to speak).
My worry today stems from a certain NY Times article, but I'm not going to address it...too early in the morning; too depressing; too OT ;-)
Instead, I will comment that it is to be 53 here in the Northeast, the birds are back singing, and, while winter is by no means OVER, the sun is in returning strength. We have food for the day. We have shelter, and we're relatively healthy. We still have SOME freedom (at least, for now). What more can we ask for?
I would be overjoyed that the U.S. has pulled most of its troops out of Iraq (except for the 15,000 mercenaries guarding the Crusader Castle, excuse me, "U.S. Embassy" in Baghdad) except for my paranoia.
If there are fewer Americans in Iraq, that will make it easier to attack Iran. Start bombing Iranian nuclear sites -- no way could the U.S. ever attempt a ground invasion -- and the Iranians could unleash unholy hell on American troops in Iraq. Waves of suicide bombers anytime an American soldier stepped out, sapper squads cutting off the long supply lines to American bases, loads of shoulder-fired anti-aircraft missiles smuggled from Iran into Iraq, terrorist attacks on American targets all over the world... Aysmmetrical warfare, bitchez. Actually, if the U.S. and Israel (same thing, really) DOES attack Iran, there will be teeorist attacks all over the world anyway.
Not that I'm any fan of the Iranian regime. Buncha religious nuts. They're gonna make a nuclear bomb, too. But so has Pakistan, Israel and you know the other countries. It's only been South Africa that had the moral decency to dismantle all its H-bombs after the racist regime was toppled.
I don't think the Iranian regime is suicidally stupid. Even though they're religious fanatics, they are also the same people who descend from the Persian Empire that the Greeks and Romans battled before the time of Christ. I don't see their Islamic selves willing to destroy all that just to get in a hit or two against Israel before hellfire comes down on every living soul in their country.
Unless Mr. Nobel Peace Prize and Once-Disgraced Netanyahu do something stupid first, that is. I wish I was back in Australia, far away from the fallout...
Well CL you learned from the article as will others. Bukko I hope Iran is not a dumb or crazy as I think they are. I do believe that hell will rain down on them should they light a nuclear candle in Israel (that is if they actually have one). I am more concerned about the Gulf or Hormuz blockade and the price of oil. That could create a WW3. Russia and China rely on Iran for oil.
I have been scanning the mining sector as well as GLD and SLV and I am not ready to jump in. I have my long positions, but nothing on the tape tells me this is a good company or ETF to invest in at the moment. All this nonsense of 150 silver and 5000 gold is just crazy talk.
Queen-no one can predict the future about anything. Follow your gut. That's all you can do and then you have no one to blame.
One thing I learned a long time ago was to never play the "shoulda, coulda, woulda" game ;-) If all these pundits with gold are correct, then won't they then be in the 1%??
Saw a GREAT cartoon today speaking about a 'new word'--the "electile disfunction"--those that would prefer anyone but the 2 candidates running.
That's my laugh of the day. It's hard to find a lot to laugh about in the world lately, but that did it for me!
Queenbee, yes indeed, this article teaches us better trading and also helps trader ‘wanna-bes’ to realize their weaknesses.
“Succinct pointers:
1) One common theme: Successful traders all share a low level of anxiety under stress.
2) It’s essential to quickly pick out chart patterns in whatever time period you are using.
3) You need to do hours and hours of homework after market close on both winning and losing trades, to understand why you made them. You need to be fully aware of both what you did right, and when you made mistakes.
4) It is essential to keep emotions in check so you trade logically based on what you’ve learned, rather than how you are feeling that day.
5) One of the biggest surprises in the research was how consistent the personality traits between successful traders were.”
(Continued from above post):
Reading these points, I realize that I am not a trader. Although we can modify our behavior, we simply can not change our personality characteristics. It is important for people to recognize their limitations. Stick with what you know, and be careful with what you do not fully understand.
This helps me to understand why I am comfortable with physical PM’s. Owning an object of value which I can hold in my hand; this suits my personality. I will never be a trader like Shaza, and that’s okay.
And aside from PM’s I also own arable land and have the skills (if not adequate time) to produce income from this. And in addition to this – I have a barn which I rent out for boarding horses, and plan to put in a manufactured home as another source of rental income.
I may have gotten off-track from this blog’s original intent; I guess my point is there are different ways for people to derive income from their investments, and the methodology for doing so is dependent upon the individual’s personality.
They are at it again.
I'm beginning to wonder if it is even safe to POST here, let alone give a link.
Scary times...so hug your loved ones and stay safe.
PS--I know nothing about this website...so draw your own conclusions..
http://dailycaller.com/2012/02/06/democrats-to-continue-internet-coup-with-new-cyber-bill/
Oops, needed to read the article first to understand the context of CL's comment. I think some people will stop commenting on blogs out of fear. If that happens then TPTB have won. I guess the difference is that I am not very paranoid and others are. I am calling for justice not revolution. They want to shut the internet down for all intents and purposes to eliminate free speech. An old gasbag like Reid will stop at nothing. The gov't doesn't want free exchange of ideas or criticism. What they want is everyone to passively accept their rules as dictated by the owners. If they just turned their sites on the real financials terrorists like GS, JPM, Morgan Stanley and BAC then they wouldn't have to bother with censoring the internet. Remember that the congress only does the bidding of the real owners. Voting is a joke as Dem or Rep you have only the illusion of choice, You have no choice. You have owners.
Back to the trading gold and silver up, but once again the miners are getting no love out of it.
Thanks for picking some quotes Mammoth from the article as I am sure they hit home for all of us.
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