I have always been much better at big-picture thinking than at execution of details. Errands and tasks are frustrating for me, but I enjoy starting with a blank sheet of mental paper and developing and executing a plan of action. My wife, Margie, on the other hand, is probably the most organized person I know. No detail escapes her notice. For that reason, I take the lead in researching our family’s investment strategies and Margie takes the lead in paying bills and maintaining financial records. Our marriage has lasted more than 20 happy years because neither of us tries to change the other. We play to our respective strengths.
When you are paper-trading different markets and trading styles, you really are scouting for your strengths. Your success as a trader will mirror success in other areas of life, such as careers or marriage, by emphasizing your distinctive abilities. If speed of mental processing is one of your superlative strengths, you might excel at short-term trading. If you are a whiz with mathematics and computers, you might find a natural fit in systems trading. Your ideal trading niche will be one that allows you to exercise your greatest talents while working around your weaknesses.
Here is an important performance principle. Please make note. Whatever your distinctive abilities might be, you are already engaging in them. This is exceedingly important in identifying where you will perform best. Someone who is going to excel at market research (to generate fundamental trading ideas or mechanical systems, for example) has already shown the ability to research—and is probably already doing some form of research—in a field other than trading. As a young child, I collected mounds of statistics on baseball players and used these to decide which cards I would add to my trading card collection. Now, as any visitor to my web sites knows, I collect mounds of data on markets and use these to trade my market. Organizing information for decision making is one of my strengths. It was a strength long before I placed my first trade. When successful short-term traders begin their careers, they frequently bring with them a history as competitive video gamers, gamblers, or poker players.
They’re accustomed to rapid decision making and risk taking: Those are their strengths. Quantitative traders at hedge funds often bring a very different background—one steeped in math, science, and other analytical pursuits.
I recently talked with Jon Markman, editorial writer for the MSN Money web site, professional money manager, and editor of the Strategic Advantage and Trader’s Advantage stock selection services. He recounted to me that his start as a successful stock picker actually began in fantasy sports competitions. He decided to conduct statistical research on the players and found that it paid off, as he consistently did well in the competitions.
Later, he applied his same love of research to stocks and was instrumental in developing MSN’s StockScouter screening tool. Now he applies this research bent to finding highly successful companies that fly beneath Wall Street’s radar, providing ideas for investors (Strategic Advantage) and traders (Trader’s Advantage). Jon’s core competence is digging deep: He approaches stock selection with the talents and mind-set of a financial journalist. That allows him to find opportunity where others don’t think to look. His niche is off the beaten path.
A formula for success: Find what you do well and then figure out how to do it in trading.
An interesting feature of Buckingham and Clifton’s book is that it allows readers to take an online test to assess their strengths. The test is not exceedingly sophisticated—and as with most questionnaires, the results can be fudged—but it does identify the activities that people naturally prefer. There are a total of 34 strengths, each of which has a simple label. For example, the strength called “Woo” reflects the ability to persuade and influence others. That is an invaluable talent among leaders and sales professionals, not one that is so important to creative artists. Feedback from the test identifies an individual’s five primary strengths. While one’s optimal trading style may not draw upon all five, it is difficult to imagine succeeding at trading (or anything else in life) if a majority of the top five are not actively engaged.
My top five traits, for example, are achiever, learner, relator, analytical, and maximizer. The relator strength is one in which a person develops a limited number of intimate relationships rather than a broad social network. Deepening an existing relationship comes more naturally than forming a new one. The maximizer strength reflects an interest in making the most of one’s own abilities and relating to others based upon their talents. Given those traits, is it so surprising that I am a psychologist who emphasizes the building of strengths through solution-focused counseling methods? Nor is it a coincidence that I trade markets by continually analyzing and learning new patterns—or that I start my day’s work well before 5 A.M. My strengths also help to frame what I am not good at: rapid-fire scalp trading, large social events, and long-term therapy with patients diagnosed with significant emotional disorders. Whether I am socially successful or a miserable interpersonal failure depends upon whether I play to my relator strengths or try to become something I’m not, as a social butterfly. Similarly, the successful traders I’ve known and worked with have found market activities that fit them naturally. Perhaps that is why they—and other high achievers—seem to perform so effortlessly at times.
Although it can be informative, you don’t need to take the book’s test to identify your strengths. Following Buckingham and Clifton’s discussion in the book, several factors will help you home in on your distinctive qualities:
• What you naturally enjoy. Given free time, what activities do you gravitate toward? What do you look forward to most each day? For reasons that we will explore shortly, our strengths are inherently enjoyable to us. If you have to summon all of your will to make yourself do something, it probably does not draw on your strengths.
• What you naturally do well. Most of us enjoy what we do well and what brings us success and recognition. Bloom’s research found that an unusual proportion of the highly talented people studied began their development with a display of early skill. Most acclaimed medical researchers, for example, began by excelling in school, especially the sciences; most Olympians display early athletic abilities. Very successful traders display different talents—from mathematical analysis to intuitive pattern recognition—but all of these have been present from a relatively early age.
• What significant others perceive in you. Sometimes we are not the best judges of our own assets and liabilities. Others may perceive strengths in us that we take for granted. Bloom, for instance, found that talented performers were often singled out early on by teachers and coaches as “special.” Sustaining this sense of specialness became an important early motivation. Long before I thought of myself as a professional writer, I had feedback from editors that affirmed their belief in me. If an experienced and perceptive mentor believes you’re gifted in a facet of trading, the odds are good that this facet will contribute to the success of your career in the markets.
From the paper-trading exercises, you learn your distinctive strengths. You will know that you are close to your market niche when you develop a feel for market patterns quickly, find yourself fascinated by the patterns you see, and act readily upon your perceptions. If you don’t find such a natural fit with a trading approach after giving it a fair test, move on. After all, when the first few dates with someone don’t go well, you don’t convince yourself to double your efforts and “work on the relationship.” If it’s work at that point, it’s probably not drawing upon your strengths or the strengths of the other person. The same is true of trading styles. If at first you don’t succeed, try, try again. But if the trying becomes trying, try something else. There are too many possible good trading niches—just as there are too many possible good relationships—to settle for a mediocre fit.
Read More : WHAT YOU REALLY DISCOVER FROM YOUR TRADING NICHE
