The No. 1 Characteristic of All Great Traders

by Darrin Donnelly on September 22, 2010

How many real-life traders resemble Wall Street's Gordon Gekko?

How many real-life traders resemble Wall Street's Gordon Gekko?

When most people think of a professional trader, several clichéd images probably come to mind.

The first cliché is that of the Gordon Gekko-type alpha-male.  The guy who sleeps just a few hours a night and neglects all other worthwhile pursuits (such as health, family, and moral values) in order to win, win, win.  They choose the trading life because they thrive on competition and they’ll do whatever it possibly takes to attain another victory.

Another popular image is that of an obnoxious adrenaline junkie.  Someone who spends their days trading, their nights gambling, and their weekends racing motorcycles.  They’re in the trading game for the excitement, the thrill of taking big risks.

And finally, there’s the clichéd idea of the “math geek” trader.  This is the stereotypical “quant,” the guy who spends all waking hours staring at computer screens in a dark room while he tests and re-tests complex equations.  This type of trader is seen as a hermit whose only joy in life comes from discovering new mathematical formulas.

There are aspects of these three clichés that are very true. 

Successful traders, for the most part, truly DO love to compete; they DO have a higher capacity to handle high risk and control their emotions in stressful situations; and they DO tend to have a fascination with finding historical trends that accurately predict future behavior.

However, all three of these trader clichés are overdone and overly-false representations of what a successful trader looks and acts like.   

I’ve spent more than 10 years studying the greatest traders in the world and I can tell you that not a single one of them could be fully described in one of the three personas mentioned above.

Successful traders, like successful people in general, have a variety of personalities and interests.  No two are exactly alike and there is no obvious “formula” for predicting which traders will be successful and which ones will fail.  (Go back to Richard Dennis’ famous “turtle experiment” for a fascinating and convincing study into this fact.)

What I have found is that while top traders share several behavioral tactics that can be learned and developed – such as the propensity to admit mistakes quickly, to stay calm and rationale under pressure, to focus intensely on the situation at hand, etc. – there is one overpowering CHARACTERISTIC that all great traders have.  And I’m not sure this characteristic is something that can be forced on someone; it seems to be something you are either born with or acquire very early in childhood.

The number one characteristic that all great traders have is the insatiable desire to acquire more and more knowledge.

When you think about this characteristic, it becomes rather obvious that traders would have it.  In fact, the concept of making a living using solely the power of one’s mind is probably what attracted them to the trading profession in the first place.

Great traders often see the attainment of wisdom as life’s highest value.  They are constantly seeking to gain new understandings of reality.  They love to solve difficult puzzles and develop new solutions for pressing problems.  They start each day with a passionate yearning to learn something new and exciting.

In this sense, traders and entrepreneurs have a common bond.

What’s interesting to me is that this quest for knowledge (or, more appropriately, wisdom) certainly isn’t limited to the stock market.

Indeed, traders tend to have a strong fascination with a number of “academic” subjects such as psychology, philosophy, sociology, theology, history, economics, and politics. 

I’ve found it to be the norm for top traders to surround themselves with shelves and shelves of books covering a number of different topics.  It’s also no accident that many traders end up getting heavily involved in political, social, and theological causes. 

Almost every great trader seems to have a particular interest in “the psychology of success.”  That is, the study of what separates a happy, well-rounded, and successful individual from one who is not.

Have you ever noticed how many of the great traders who have written books tend to include sections that have nothing to do with the markets and are completely focused on success, psychology, or “self-help” advice?  Nicolas Darvas himself dedicated an entire book to his success philosophy. 

The thirst for knowledge is probably a leading characteristic for success in any field.  The fact that top traders share this characteristic comes as no surprise.

The real question is: can this characteristic be taught?  Can it be acquired?  Can those who are most comfortable believing what they’ve always been told and enjoying the security that comes from never questioning their long-held beliefs suddenly be taught to change their ways and start a quest for new knowledge? 

I’m doubtful.

Questioning strong beliefs, breaking out of the status-quo, and going against the crowd can be troubling and unpleasant.  If things are going decent in your life, why put yourself through the mental angst of breaking new ground and shattering previously-assumed “facts?”  

It can also be a lot of hard work.  Not everyone finds it enjoyable to spend long nights and weekends reading books and developing new theories and philosophies. 

For top traders, this characteristic isn’t a choice.  It’s embedded in them.

How about you?

The fact that you’re here, reading this article, is a good indicator that YOU probably have a desire to constantly increase your wisdom, question old beliefs, and expand your knowledge base. 

That characteristic will certainly give you a leg up in the ultra-competitive trading profession.

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{ 2 comments… read them below or add one }

Milad September 23, 2010 at 1:34 pm

Hi Darrin,

Great post! Although I am just starting my trading journey and by no means acquired consistent gains, my shelves do seem to be packed with books on many subjects.
There is another factor that keeps pushing me forward which is a deep sense of confidence that you know you will be successful if you master this, hence, the constant thirst for knowledge.

Speaking of great traders that include things that have nothing to do with trading in their books, Gerald Loeb comes to mind. lol And I hear Darvas read his book a few times a week.

Also, a deep appreciation of your craft, just like an artist, you want to master it! Money is great (well, pretty great), but the moments you remember most are those early in your learning curve where what you learned turns up on charts and you light up, pieces start to fall in place. Moments where your own personal judgement (know how) and your book knowledge meld together. The by george I think iv got it down moment.

Thanks for another great post.

-Milad

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Darrin Donnelly September 24, 2010 at 11:45 am

Hi Milad,

Thank you for your kind words – I really appreciate your support!

It sounds like you and I are on the same page with our committed and never-ending quests for more knowledge. I’ve truly found it to be the top characteristic of all great traders.

I also like how you referred to your trading “journey.” Too many people get into trading thinking it’s a “get rich quick” opportunity. And thus, they walk away frustrated (and poorer) at the first signs of true adversity in the market.

The best traders recognize that this is a long journey of doing something you enjoy doing and playing a “game” (for lack of a better term) that you truly love participating in.

Thanks again for taking the time to leave your comments here!

Sincerely,
Darrin Donnelly

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