Even tho it sounds gimmicky these 4 principles really do drive success for traders. At least, I can attest it for full-time FX traders – others, I can’t say, that’s not my edge.
- Performing from your sweet spot
- Acquiring and building a skill
- Being able to deliver whenever there’s opportunity
- Remaining on top
Those four topics are the pillars for trading success, you want to become a full time trader – focus on those four, in that order!
I’ve just listened to an amazing podcast on chat with traders – Aaron Ffifield had James King on and the conversation was amazing that I’ve decided to make a blog post about it.
You can find the link to the podcast here:
You can also find James A King website here:
Now that we’ve shared this information, let’s dive into it!
What drives elite trader performances?
Ambition? Hard work? Talent? Yeah… But…That’s not the entire story
Neither is the 10,000hour rule, which I guess is rather reassuring for quite a lot of you?
In the point James King shares he makes it clear that he sees excellence as a pyramid, that has four core levels:
Screw using PowerPoint pyramids, might as well use a real one!
Those four principles are key to your success as a trader. As always, the first one, performing from your Sweet Spot is the most important. Since it’s the base, without it, everything would break.
Performing from your Sweet Spot
So what’s a sweet spot? Is it in the kitchen next to the candy jar? Nop, sorry to disappoint! I’ve got bad news, worse than the joke I just made, I actually can’t tell you what your sweet spot is.
You’ll have to ask yourself some questions, but we’ll come to them afterwards, let’s first address why do we need to perform from our sweet spot – it’s easier to perform when the goal you pursue aligns with the quality that makes you unique.
I’m not chasing someone else goal – I’m unique so I’m chasing my own goal and it’ll be way freaking easier if it aligns with things I’m good at.
So what’s your sweet spot? It will depend on your strength, interest and values – and those are not necessarily related to trading at all, it could be things you used to excel at when you were a kid.
What comes naturally to you? Do you like spending time reading news and staying up to date with what’s happening in the world? Are you better at solving puzzles? Are you always up to date on everything?
Once you’ve figured out what comes naturally to you, it could define your trading style, if for instance you love reading news and understanding how countries are being governed, then maybe trading the macro/fundamental side of things could be something you’d be better at that trading technicals? If on the opposite you hate watching news (#WelcomeToTheClub) but you like trying to solve puzzles, build stuff and have a strong imagination it’s likely you’d see better results in your trading if you were a technical trader.
If you are interested in technical analysis and trying to find levels where price is likely going to reverse and can spend a lot of hours without having to be motivated by someone else it’s a good sing – because the truth is, you’ll have to put in the time. So if trading gold interest you more than trading currencies or even equities you should focus on that side of things.
To find your sweet spot and to know what you should focus on to become an elite trader ask yourself, where have you excelled at in your life? What have you been highly responsive to training? What personality do you have (btw I highly recommend doing the Meyer Briggs test, it can help you find your strengths as well as your weaknesses, which is rather important!) What are you always motivated to do? What type of asset class are you the most interest in?
All of this leads to the question what are your values, what’s the most important to you? Is it money? Is it fame? Is it time? autonomy? etc Based on your values you may discover that working at a prop desk or a hedge fund doing research may be a better place than trading your own capital.
Find your sweet spot – and execute from there.
And yes, we’ve spent all this time not even talking about trading or performance but just about figuring out what we want to focus on.
Skill Acquisition
Here’s the good news, you probably won’t need to spend 10,000 hours working your ass off before you master a skill, if you do, it’s probably not your sweet spot or you’re following a shitty methodology 🙂 Let’s dive into the 7 key factors when building a skill to excellence.
Start with the comprehensive foundation
You don’t have to do extraordinary things – you have to do ordinary things extraordinarily well –> think about our friend Bruce Lee 🙂
You want to master the basics, without a mastery of the basics to stand on you’ll go nowhere.
Apparently in Tennis 85% of points are made in the service / return and return service – yet most tennis players only spend around 15% of their time practicing those skills.
You want to find what are the big levers for success, don’t focus on tiny marginal gains, focus on the big levers. That’s where the value is at. In trading it’s probably around entry / stop sizing and exists. That’s where the money is made, it’s not about anything else.
Practice over theory
It’s what you can do not what you know that matters – knowing how to kick a ball the most precisely as possible but not being able to do so in practice is useless. You’re better off not knowing the theory behind it but be able to hit every target that’s set.
Turn your learning into practice, don’t spend too much time on theory you have to think, do and produce –> once you’ve practiced enough you can articulate what happens then that’s fine, but practice over theory.
It’s all on you
I don’t really care if you end up super mega successful, your neighbor doesn’t either, it’s only on you, it’s your future. Don’t expect to be given the answers (well, that’s kinda what I’m doing here on a daily basis) you have to figure it out for yourself.
People can explain to you a strategy, but it’s on you to understand it and develop it. Advanced skills need to be discovered they can’t be taught.
Take responsibility over your future.
We need challenge to change
If we remain in our comfort zone we won’t evolve sadly, heck I wish sitting in my hamac would enable me to improve my 5k time, sadly I need to push myself to be able to build more muscles.
We need to spend as much time as possible in a challenging zone to be improving, you need to be absolutely focused on what’s happening – if you’re thinking about what you’ll be eating at dinner tonight when practicing you might as well stop straight away!
Get uncomfortable, learn to enjoy being challenged, but if you’re at a point where you’re starting to panic, you can take a break 🙂
If it doesn’t happen when you’re competing, it doesn’t matter.
There’s no point in practicing things that will have absolutely zero impact on your trading results – so many kids dream of becoming a football star, they go home and start practicing tricks with the ball, the problem is, being able to do fancy tricks with a football probably won’t win you a championship – being able to shoot straight, run faster, control the ball, tackle is what matters. Well, I think, I’m not a big football fan.
Create uncertainty
It’s nice to practice when you’re comfortable at home with zero stakes where you control all the factors, however you want to have uncertainty. You need to train in the conditions you’ll be executing – and then imagine even more extreme conditions – for instance for traders you may want to focus on extremely hard to trade markets, periods with drawdown, making decisions with a time limit, it’s all well having a backtest tool that you can pause to make a decision, but in live market conditions you’ve don’t have all the time you want.
Learning is the mindful search for solutions
It’s not mindlessly repeating a solution, it’s a mindful search for a solution repeated over and over – for instance think about your phone, to be able to unlock it with your finger you have to scan your finger several times, in different angles / positions –> what it’s doing is that it’s learning through variability to be able to recognise it whichever angle you end up using.
If you only gave your phone 1 try to collect your fingerprint I’m willing to bet your phone wouldn’t open as quickly as it does now, it would reject you quite often as well just because you didn’t train it with different conditions.
Out of every successful trader I’ve met (and the ones James has met) it’s very rare for them to rely on 2 extraordinary things – instead, most successful traders have mastered the basics and just don’t do mistakes that cost them their career.
Anyway that’s enough for our second point – the skill acquisition to become an elite trader.
Delivering on demand
Being able to execute your strategy whenever the time calls for it even tho you’re under pressure is key.
I remember Josh Waitzkin in the art of learning was talking about the ability masters have to switch on and off – for him he could just listen to one song and be pumped up ready to fight.
Outliers are able to flick a switch to regulate their emotions and execute. You want to be able to enter a flow state and have access to all your knowledge and training.
You need to spend time building your skill of getting into the zone – it’s a skill like all the other ones.
Your thoughts + Your actions = Emotional State
If you realize your are in a suboptimal state, think what are you doing, thinking, how you’re sitting, breathing etc.
Your thoughts and actions will change your emotional state.
The sea won’t always be calm. You need to be able to get comfortable even in the worst weather.
If you feel overwhelmed try to break the feeling down – is it because you’re in too many trades? If so only take 1 trade at a time until you’re comfortable. Is it because you’re trading a new asset class? Trade with a smaller risk!
A nice short section, but it’s so key.
Josh Waitzkin recommends listening to a song every single time before practicing – for instance before every single workout for a month listen to the same song. After a few months of that habit it’ll probably pump you up as soon as you hear it.
Sustaining Success
Let’s start this section with dark reminder: More people die going back down Everest than going up.
It’s actually got a name in climbing, the “post summit peril”, you’re tempted to bask in the view, enjoy life, congratulate yourself and switch off your focus really enjoy the moment. When you go back down….
There’s two key biases we need to keep in mind
- Continuity bias – We believe the future is the same as what we’ve experienced, we down play the risk since we’ve made it so far, it’ll just remain the same.
- Illusion of personal control – We downplay the rate of luck / variance in our success, we forget we were lucky because we had a favorable backwind – it makes us complacent because we believe it’s 100% thanks to us, we forget the circumstances were in our favour.
Those two key biases probably won’t impact us immediately it’s a slow process that will definitely lead to your long term demise sadly.
Although we want to strive to become the best, you can never allow yourself to believe you’re there –> when you’re second you have the drive to keep moving forward, when you’re first it’s easy to loose all motivation.
To do so, develop a comprehensive understanding of what it’ll take to win and a comprehensive understanding of where you are –> that will enable you to find your weak spots and what are the important levers you want to focus on.
If you really understand what is holding you back, the solution will probably fall into your lap 🙂
If you look at the best teams, for instance the All Blacks when we think of rugby, they don’t focus on being the best in the world in their sport, they look outside of their “industry” they are competing to get the best win rate in every sport. They’ve set bigger targets.
Standing on your own success won’t be enough. You need to keep evolving
What you need to keep in mind is that you’re basically evolving in a ever continuing circle of improvement – even tho you’re at the top of the current cycle, you’re not at the top of the mountain, you’re only in a transitional moment towards the next cycle.
That’s it for today!
I hope you enjoyed this one!
Oh and, James A King released a book I’ve just ordered on Amazon so I can’t speak about it, but the podcast was fantastic, you can find it here
Once again;
You can find the link to the podcast here:
You can also find James A King website here:
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