With more than 35 years of trading experience, I’ve had the privilege to teach and coach thousands of traders at the Van Tharp Institute. Some traders succeed quickly, some require a bit more time, while others struggle their way through. I came to understand what is really important—or moreso—crucial to in order to develop into a great trader within less than a year.
To shortcut your trader development journey (for most it takes >10 years) I am a big proponent of a dynamic learning environment to trigger exponential skill growth. Let’s use a metaphor: The “Autobahn” needs to plan and get prepared well in advance by making its surface smooth and broad enough, by straightening it out and by taking the roadblocks out of the way so that a racing car can eventually go at lightning speed.
Over the last 15 years coaching traders, I came up with a dozen very important factors – let’s call them the Key Success Factors (or KSF) – that are common to every trader. The 12 Key Success Factors are fundamental for growing quickly and steadily into a consistent trader within less than a year.
You basically want to make a “tick” for all of them to fully uncover your trader potential, and quickly.
If you are a break-even trader already, or maybe not yet, ticking off one of those KSFs (that had not yet been considered) might turn you into a consistent and successful trader.
I guess it is obvious that if you want to win a car race, you need an advanced car with an edge. Hence, you need a good trading system. Or better, several systems that complement each other.
But, a system with an edge is only the prerequisite for winning the race. As Van always stated, “It is not the system that trades the markets, but the trader!”
Unfortunately, the vast majority of traders out there are losing a lot of time as they are not applying these important factors early on in their trading career. They believe they can compete and win a race without proper preparation. Clearly, it is;
- NOT about sitting in front of the screen for many hours per day,
- NOT about having the goal of maximizing your Weekly/Monthly R-results,
- NOT about trading the markets right away and trading whatever moves,
- And NOT about getting euphoric and emotional when trading the markets.
Find an overview below and additional information for each of those Key Success Factors.
Check out all those Key Success Factors that go just beyond the System (KSF1) and find out for yourself what important factors you are missing. And let me know what you discover!
KSF1: Have a Trading System(s) With an Edge
Probably the most obvious KSF, many traders still do not have a system based on a low-risk idea with a clear trade setup, entry rules, initial stop-loss, a multi-layer exit algorithm and a position sizing strategy.
In my experience, the best systems are based on a “double trader trap”, meaning countertrend traders get trapped in a bad trade and trend traders get trapped out of a good trade at the same time. Often, good systems are counter-intuitive which is why they work.
Unfortunately, most traders void of a system just want to trade the live markets.
There is a common belief that, over time and over many trades, the trader gets the hang of how to make money. Note how this is a non-useful and costly belief. It is surely fun and entertaining to engage in naïve practice, but the outcome is quite the opposite of the ones desired:
- Cementing non-useful trading practices
- Creating an array of non-useful beliefs with emotional charge about Self and Markets.
Do you know of any elite tennis player who got into the Top 20 by just hitting balls with friends to win the game?
Do yourself a favor and do not do this. Save your time, energy and money!
KSF2: Set a Clear Trading Goal
As with any peak performance activity, you have to be very cautious with setting output goals. Process goals work much better. It is counter-intuitive, but when focusing on outcome, it tends to fade away quickly. Outcome follows process and, a bit like a shy deer, it cannot be chased. Thus, the overall process goal should be to flawlessly execute high-quality low-risk setups (and you can measure yourself against this).
However, as traders, we need a secondary performance goal too. For this, stretch goals do not work well. Focus on a goal that can be achieved even under difficult circumstances and then look for “consistency” in achieving that goal. I set out for my traders a Weekly R-goal of minimum +2R (or minimum +5R per month). Once this can be achieved with consistency week after week (e.g. +2R, +15R, +3R, +5R) for a period of three months, then it pays out to work on increasing the position size so to add leverage. With consistency, you want to work on maximizing your position size, not the number of Rs per week.
Should you overachieve your minimum R-goal early on during the week, you need to have a Trader Strategy in place to next go for higher R-levels while not risking what you have already achieved. (See KSF9, which I will cover in my next article.)
A minimum target of +2R per week does not sound like a lot? Depending on your position size, +2R can be a substantial nominal amount for the week. And making only +2R at 1% position size every week produces an annual return of more than 200%.
KSF3: Apply Useful Beliefs That Support Your Trading
Some beliefs are useful while others are non-useful to trading. Some very useful beliefs that made you successful in business might be very non-useful, even detrimental, as far as trading is concerned.
Again, it is counter-intuitive, but useful beliefs might not even be true. Beliefs are just a filter to reality and how you perceive what is going on. Beliefs have a strong impact on mental state. Thus, you want to be aware of them and change (or replace) the non-useful ones.
As an example, a very useful belief is, “One Good Trade Per Week is Enough!”
Note how it is not even true, but if you can hold it with full conviction that only one good trade per week is needed to reach our goal, then your mental state around FOMO (fear of missing out) and over-trading will have completely changed.
KSF4: Establish an Appropriate Mental State
In my experience, every trader has an ideal mental trading state that is slightly different and very specific to that person. My ideal state is being cool and calm while suspicious about someone digging a market trap for me. It keeps me alive and alert to actually look out for traps while trapping others.
What generally works best for many is a mental state of “Focused Indifference” or maybe a more catchy label: being Cool, Calm & Confident—the 3 C’s. Often it is easier to directly relate to the feeling that is connected to a good mental trading state. If you can hold the feeling of “gratitude” during your trading session, no matter what, then you are in a great state – a state of inner acceptance.
It needs to be noted that your mental state may depend on your consciousness state. Being an angry or fearful person will make it difficult to achieve long-term consistency. In such a case, and as a prerequisite, you might need to release a few non-useful beliefs with emotional charges first (we have the tools). As well, starting a regular meditation practice is a promoter of a good mental state (see KSF11).
This KSF might be the one you feel most resistance against.
Ask yourself the question: Why would you want to make it difficult, when trader growth can be so much easier?
KSF5: Follow the Trader Development Path Taking One Step at a Time
What I experience over and over again with traders is wanting to achieve too much too fast!
When actually, if you go slow and step-by-step in a deliberate manner, you will achieve your objectives much faster, get a deeper understanding and have much more fun. You will not have spent all your energy through struggle and despair on your way.
Below you will find the trader development path that I lay out for my traders. At each development phase, a trader wants to achieve the “Competence Level” and become consistent before moving on until eventually getting to the Mastery Level.
Note: If you want to go fast, your trader development should be based on applying the principles of Deep Practice in combination with a trader simulation software (see next KSF).
KSF6: Apply Effective Trader Tools: Deep Practice and Simulation Technology
Deep Practice, or Deliberate Practice, is a very effective way of learning in a dynamic learning environment (school learning is organized in a linear way). I am not aware of any other trader coach to apply the principles of Deep Practice in trading. This is a bit of a surprise as in sports it has already been done for many decades now.
So, what is Deep Practice about?
First, the overall process is conveyed, then the focus – the deep practicing – is applied on individual tasks one after another. With the overall process getting cut down into little chunks, each individual chunk gets experienced and learned in and out till it is mastered. Then it gets integrated with priorly mastered chunks. The overall deep practice process is as follows:
Absorb the Whole – Chunk it up – Slow it down – Repeat it – Master and integrate it – Love it – Make it fluent.
As you all know, children learn at lightning speed, exploring the world by making small mistakes to learn from while having fun. We want to reconnect to this very efficient way of learning in a controlled, but dynamic learning environment. As a trader, the fastest way forward is to allow yourself to make mistakes (or small failures) to grow quickly. And trading simulation software is a very efficient technology tool to speed up the whole process.
Wouldn’t you want to get back into a flow state of learning that leads right into exponential skill growth?
Good trader development,
Gabriel Grammatidis
For more information on the individual KSFs, join the free Trader Community on Gabriel’s website: www.IntuFX.com
KSF1.1 – Find out more about Gabriel’s upcoming Futures Workshops here.