There has been for some time a buzz about natural talent and what is needed to become an exceptional trader. With child prodigies in chess, music, sports, math etc., why not trading?
In Peak: Secrets from the New Science of Expertise(2017), an expansive three decade review reveals that there are no magic genes people are born with that allow exceptional performance in any area. It’s all training, and specifically deliberate practice in certain areas that develops the best performers in each profession. The myths of child prodigies is thoroughly debunked in this great read.
There is no specific gene for exceptional chess players, musicians, theoretical physicists or traders. It’s all learned skill sets. And the skill sets are not transferable. A great tennis player, mathematician, or doctor will not automatically be a great trader.
And there is no limit to your learning, even with advanced age. People stop learning at certain ages because they stop practicing. Somehow, they don’t see a value in continual self-development and learning. Perhaps it is easier if you start a new skill when you are younger, with less distractions to garner your attention. However, as you age you retain the ability to continually learn new skills, including trading expertise.
On top of specific skills, a solid knowledge base is required in any field, and trading is no exception. The markets moves up and down, based on human emotion and human nature, repeat themselves over and over again. Recognizing these ebbs and flows and how other great traders have revealed them can be very helpful as your trading skills develop.
Nowhere does history indulge in repetitions so often or so uniformly as in Wall Street. The game does not change and neither does human nature.
Jesse Livermore
When someone takes the time to write a book on their trading there are likely some good lessons contained therein. Focus on books by traders trading their own money, not fund managers. The psychology is vastly different with someone who’s own hide is on the line.
A trading library is something every trader should gradually develop. In addition to Peak mentioned above, here are some of my favorites to date:
- How I Made $2,000,000 in the Stock Market, by Nicolas Darvas (A classic in the do’s and don’ts of trading)
- Mastering the Trade, Third Edition: Proven Techniques for Profiting From Intraday and Swing Trading Setups, by John Carter (Well written in the trenches trading advice with a current professional trader)
- The Little Book of Market Wizards: Lessons from the Greatest Traders, by Jack D. Schwager (A summary of the mindset from the best traders from the three decade market wizard series)
- Reminiscences of a Stock Operator by Edwin Lefèvre (Classic lessons from one of the greatest traders of all time, Jesse Livermore.)
- Unknown Market Wizards, by Jack D. Schwager (The only other market wizard series book I recommend. It features only traders who are trading their own accounts.)
When it comes to technical trading instruction, a paper-based book is essential for viewing charts and trend lines. When studying the psychology of trading I like the use of audio books. Either way get started today!
Enuf said.