Essential Traits of Highly Successful Traders // Ep. 53

In This Episode

• Was getting a PhD worthwhile for Walter?
• Why INTJ isn't all it's cracked up to be
• The one characteristic that we both agree is one of the top traits of successful traders
• Cognitive Behavioral Therapy

What Characteristics Make Traders Successful?

We've both been trading and teaching traders for many years. During this time, we've probably come across every type of trading personality…between the two of us.

So we sit down to compare notes on what we've seen as the most important traits in successful traders.

One characteristic that Walter brings up is a trait that one study also found in successful gamblers.

The important thing to remember is that even if you don't have these characteristics, you can develop them. 

We've seen people develop these traits, so it is possible!

Read the Transcript:

Hugh:     Hi, Walter. We have both met quite a few people over the years and quite a few successful people. What are the core traits that you see in successful people and successful traders?

Walter:    That is a good question. It is interesting because I think, you know the test where it is like I am an INTJ or EFP?

Hugh:     Myers and Briggs.

Walter:    Myers and Briggs, yes. I always get that one confused with the, there’s another one but anyway, with the Myers and Briggs, I have seen on forums and stuff, people discuss like, “Oh, you know if you are an INTJ, that is the best trait or profile” or whatever and I can see why people go down that way.

Actually, there’s only a few things that would make it easier. There’s a really good study of like, really good gamblers. As funny as it sounds, the way that the author describes it is that they almost look as if they live forever. So when they are looking at the odds you know when they might have a slight odd in a certain situation.

For example, I don't even know enough about poker or blackjack but like in a certain situation, with a certain hand in poker or blackjack you know, your odd shifts. Or, a certain  number of face cards have been pulled out of a blackjack deck even if it is a six blackjack deck, they are all mixed up together that they are playing. You know, there’s tons one shifts and you get a slight advantage.

It’s almost like that in a study, they almost seem like they just live forever and so they look at things on a really long time frame. I think that is one thing I would say that is interesting about successful traders. They have that ability to kind of see the value of a really slight edge.

I think when we first start trading, we assume that we cannot even start trading until we have this enormous edge. Once we find that then it's like it is over you know we are just going to mine that sucker. So I find that fascinating about gamblers. I think that a lot of that translates to trading.

The other big one would be resilience. I think that most traders quit and move on to something else or just find trading too painful when they are unable to overcome losing streaks. I think that is a big one.

I think that is probably the number one reason why most traders do not make it. Not because they do not have a good system. Not because they do not have good risk rules in place but because they were unable to trade through that draw down.

So they come up with excuses whatever they are. The system is broken. The markets have changed. I am not cut out for this, you know, this is the wrong strategy for a negative interest rate environment. They can come up with a lot of reasons why and they quit.

So resilience I think is good and also the ability to see the advantage like to play out the odds on your head. You can do that obviously with the spreadsheet. You can do that with a Forex Tester, all that’s really important.

I think for me, if you are able to see the value and truly I guess, it is kind of in a way probabilistic thinking. Would be kind of an overarching general thing. I really think it is important and I was thinking the other day not to go too far for attention. I want to get your ideas too on these.

I was thinking about kids and what is important for kids to learn. I went to school for a long time but I am not sure that going to school and getting a PhD or whatever like I did is really the best thing. In a lot of ways it kind of pins you in a certain corner and you almost cannot get out of that.

And so I was thinking, “What is this really good skill for people to have?” I thought one would be the ability to understand probabilities and statistical thinking. The whole game of Science, Science is a game and it is run on probabilities basically. Everything, it doesn't matter if it is geology, astronomy, medicines or psychology, it’s all a game of Science.

So if you can understand probabilities and statistics, you can read all those papers, you can see what everyone's gaining, you can do all that. The other thing would be storytelling because there’s a lot of value in that.

I’ll tell you a quick story. One of my friends, his whole business is getting investors. To invest in a fund of Australian properties and he was saying that he had this guy come over from Switzerland. A Billionaire guy and they were trying to get him to invest in his company or whatever. He was like, “All the guy said to me was tell me the story”.

My friend was like, “I could not do it. I didn’t know what to say. We had all the numbers and everything but we didn’t have the story.” I think there is a lot to that. I remember in high school, sitting on a bus going out to the ski fields. It was a three or four-trip. One of the guys, he was a year older than me in high school, was sitting in a bus. He was sitting telling a story and everyone was just riveted.

I remember thinking, “That’s awesome!” Like, this guy can do that. It’s such a cool skill, you know, to be able to tell a story in a way that is engaging and can teach lessons and stuff. So I really think you know there's a few other things like maybe learning how to speak in front of others.

There’s certain skills that you can get and you do not necessarily have to get a Master’s or PhD to have those skills. You can learn probabilistic thinking. You can learn storytelling, all those things. You can learn how to speak in public in an engaging and interesting way.

It is fascinating to me  how many really good Scientists are terrible speakers. You can see that. It is weird to me like you would think if you could spend your whole life on this one issue like this one thing about whatever it is, anti-aging or something about the number of Earth-like planets in the universe.

If you have some really important thing you thought, “This is the most important thing” you’d really understand, ozone layer or whatever you would think that you would spend a little bit of time learning how to explain to other people.

Hugh:    Hey there! I hope you find this episode useful. I just want to let you know that Walter and I give away something valuable every month that helps traders improve their skills. You can enter to win by simply leaving an iTunes review and leaving a comment on our YouTube videos.

At the end of each month, we'll look at the comments and reviews from the month and we'll pick a winner at random. Each comment and each review counts for one entry during the month that it's pitted.

So, if you're interested in that, be sure to enter after this podcast is over. Alright, back to the episode.

Walter:    I know it is a long winded way but for trading specifically, I think it is probabilistic thinking and being resilient, which is the ability to bounce back in the face of a really tough time. That’s what traders have to deal with in terms of losing streaks. What are your thoughts?

Hugh:    I totally agree with you on the resilience part. I think a lot of these guys were business people just stuck with it. If you just stick with it at some point, if you try to improve, you will get better. I think that is a huge one obviously.

Also, a lot of good business people and traders are I think kind of weird in terms of what the average person thinks about them. It is the idea of having independent thought, thinking for themselves and trying to figure out: What really works for me? What really works at the markets? And not like you said, fall into the trap of education. Like the guy who can quote out books but he cannot trade to save his life.

I think that is a cue one, to be able to think for yourself and to be able to really think way, way, way out of the norm really puts you way ahead of most people.

Walter:    That is such a good point. I’ve noticed that differences between people generally speaking, in the U.S versus in Australia is that in Australia we have kind of this really traditional English way of teaching children. Not universally but in a lot of places.

What that means is they get grounded in the classics sort of thing. So they can quote the classics and they can understand certain things that are held high in our Western culture and ideas and authors and stuff like that.

In the States, it is exactly what you say. I think there’s a lot of value placed on things like the cowboy or the lone ranger. That sort of idea, the guy who is just out on his own kind of doing his own thing. Figuring out on his own and being an individual is so important.

Whereas, in Australia there are a lot of great things but one of the things I’ve noticed is it values being in a group like the community. It is a very Asian idea of like the good in a community and that is really important.

One time I remember my friend who is an Australian, he was trying to console me because of what happened in California because I had a failed business for lots of reasons. He was saying, “Oh man, I’ve always been on…” which is basically what you are just saying. He said, “I’ve always been a businessman with a failed business because he’ll come good you know because he understands that he’s been through the worst.”

I was thinking to myself, “Dude, I don’t even need you to tell me this”. Do you know what I mean? That was not even a concern for me. It really wasn’t. I was like, “Ah, bummer!” It was a couple of years in my life or whatever, a year and a half and a lot of money and work, this and that but it didn’t work out. I was not worried that I could never do anything because I had a failed business.

His point was exactly what yours was. Which is you have two people: You have one that never seen failure and one has seen failure. Which one do you bet on? I would always go with the guy that has been hardened through the trials and burning through a doomed business or whatever as a business person. He was saying like that. I could appreciate what he was saying but I don’t need to pep talk.

Hugh:     Totally but that brings up the point also like if somebody thinks they do not have these characteristics, how can they develop them and you think that some people are just destined not to have them?

Walter:    I think in my opinion, from what I’ve seen even in Psychology research, they used to kind of think that way. I’ve heard all the people say this, “Your kid’s personality is formed before they turn five” and all that.

We found that personality actually is quite malleable and I’ve noticed that I’ve changed in different environments. When I was in a certain circle of friends in undergraduate school, I was a certain way and then when I went to graduate school I kind of became a different person in a different group of friends.

The same thing when I left the U.S and came to Australia. I am kind of a different person you know and everyone was saying I’m always different with my grandma than I am with my friends from high school. That’s fine. I am talking about actually sort of changing your introversion/extroversion personality.

Let’s take an example, resilience. We both identified resilience as being an important thing. So an easy way for that and there’s actually a school in Australia that teaches this way and a lot of Psychology schools as well.

If you go to like a cognitive behavioral therapist because you are depressed or something, they will teach you the skill. But in terms of trading, let’s say that I am in a losing streak and I am thinking, “Oh no, here we go again. Another failed strategy. I am trading a strategy. It is failing me. It is not going to do very well. I need to give up. I need to find something better. I need to reassess and I am going to lose all my money. I will never be able to make trading work. I will never be able to quit my job.”

All these things will cascade and so what you do is you can build up resilience by re-phrasing that self-talk. The way that you see things and so you identify, that is called catastrophizing. Just because I have a losing streak of six trades means I am never going to make it as a trader. That is catastrophizing.

It sounds ridiculous when you and I talk about it right now but actually for a lot of people, that is their reality. I’ve been there and you’ve probably been there where you’ve had situations, does not have to be trading. It could be anything. You start thinking, “Oh my god! It is never going to work.”

So that could be retrained and you can train yourself to say, “Hang on, so I have been trading this system for how long?” “Two months and I back tested it for how long?” “Ten years. In the ten-year back test, did I ever see a draw down of six trades in a row that were losers?” “Oh yeah, so is it really the case that this strategy is busted?” “No, probably not.” “Is it likely that it is a normal draw down?” “Yeah, probably”.

So what you are just trying to do is just trying to in-through yourself up a little bit higher, slightly more positive emotion through logic. That’s all there is and they do that with depressed people too, with cognitive behavior therapy. You can look up CBT on the internet and see that but that is what you can do to build resilience.

You can just learn new tools where you kind of step back and say, “Is this real? What am I seeing here or am I just catastrophizing? Or, am I just letting my thoughts get really negative and keep going to the point where you know, I am just off the map. Like, I’m not even in reality anymore. I’m just in another world of manufactured pain and suffering.”

It is so easy for us to do that because our ancestors do that and they’re the ones that survived. They were the ones that were worried. Wait, what is the noise in the bushes? It must be a lemur or whatever. They’re the ones that survived, right? The guys that are just whistling through the woods, they’re the ones eaten by the lemur. I don’t even know if lemur eats people but you know what I mean.

Hugh:        Great points, for sure. I think another thing too that I found is that motivation really plays a big part in it. If you have the proper motivation, you can do almost anything. If you are not motivated, you have a nice cozy job and you kind of like it then probably you won’t quit. Because trading is tough in the beginning so I think that is also another thing to consider.

How can you maybe not artificially create motivation but dig up your real motivation behind what you want to do. Do you want to travel around and be a trader? Do you want to buy things that you cannot afford right now? Do you want to take care of the kids and see them grow up? Stuff like that and I think that is also a great motivator to improve whatever you need to improve no matter how hard it is.

Walter:    Yeah, that is so true because you will see that in traders. The ones who like no matter what they still push through and it helps build resilience when you have that end goal and you know there is nothing else you are going to do except to achieve that goal. So it is really a good point.

Hugh:    Cool, alright. Thanks, Walter.

Walter:    See you!

Hugh:    All the information in this podcast is for educational and informational purposes only and is not trading or investment advice.

Enter the Monthly Contest

We give away a trading prize every month, so be sure to enter to win.

You can win by doing one or more of the following:

• Leave a comment on YouTube
• Leave a review on iTunes

Each action counts for one entry in the month that it was posted. We will pick a winner at random from the entries that month.

The giveaways can include books, coaching sessions, trading tools, or surprise gifts.

Click Here to Suggest a Podcast Topic

Listen to the Audio Version

Click the play button below to hear the audio-only version. You can also download the mp3 file below.

Podcast: Play in new window | Download

How to Get New Episodes of The Think Profit Podcast

You can get notified of new episodes of the podcast by subscribing to our email list, or subscribing via any of the major podcast platforms that can be found here.

If you enjoyed this episode, a 5-star review on your favorite podcast platform is always greatly appreciated!

Thanks for listening and we hope that your trading is going well!