If you regularly browse and or contribute in forex trading forums you’ll quickly realise that traders come in all shapes and sizes, from all ‘walks of life and from all corners of the planet. Many have brilliant illuminating stories to tell and pasts to recount (and on occasion recant) as to how they came to arrive at a point in time were they’re either recognised as, or have given themselves the title of, “forex trader..”
If you ask either forex brokers or spread betting firms what the breakdown of their losing clients is they’ll suggest at best it’s twenty percent winners. As an aside one director of a spread betting firm when I recently asked him what; “the breakdown of his customers was” replied with dry humour, “oh we have at least one or two a day that have a serious breakdown”..
It’s far more difficult to establish what backgrounds successful traders had, what jobs, professions, qualifications led them to seeking out retail forex trading as a profession than what the percentage of winners versus losing trades is. If looking for a common factor it’s very difficult to quantify. Our pre-conceptions lead us to believe that someone in the banking industry, an accountant, an engineer or a maths genius would have the ability to fashion an edge and carve out a career in retail forex trading. However this could prove to be wide of the mark.
I recall an engineer who tried to master what he had outwardly perceived to be the ‘science’ of forex trading, he eventually give up having decided that his analytical skills were not suited to the industry.
He reached the rapid conclusion that having an analytical/logical background, was in fact a liability to trading. The first thing that analytical/scientific types will do is look at a FX chart and assume there must be some mathematical formula driving price action. That mindset inevitably leads to a path searching for the “holy grail” formula that encompasses every possible scenario that may occur on a chart, a search that can continue indefinitely.
Analytical types look at a chart and become convinced that correlation is everything, that there has to be a science underpinning the whole process, a consistency, a mathematical constant. Technical types focus on logic and exactness and in trading the process is never exact or logical, other than with hindsight. Resistance and support zones may or may not be reached ‘right on the dot’ and there are times when doing what appears to be totally illogical; buying when everyone else is selling, may result in banking pips.
However, the engineer did have words of encouragement and by his own admission came close to the tipping point of moving into profitability, unfortunately it appeared that it had come to late. He’d expended enough time, energy and money and had to “go back to the ‘day job”. He would actively encourage analytic types to attempt to trade once they’d discovered and begun to accept the unorthodox and at times random nature of the markets.
He’d also remind fellow traders, that it’s probably analytical types and traders that are responsible for developing the trading platforms that we use and take for granted. The incredibly complex formulas that are required to drive the software that makes platforms work were developed by analytical types.
I recall a mentor stating that in his experience, the three best occupations leading to success into trading were the Military, Pilots and Musicians.
If former full-time musicians relate to the charts because they move like music they’re likely to be in for a huge let-down, it’d be impossible to compose a tune as random as the days when the FED announces a round of quantitative easing. Similarly believing that the disciplined approach to learning to trade is the same as the approach to learning an instrument is equally misplaced other than accepting that to become perhaps a grade eight piano player can take a decade. The charts are not a long, continuous jazz improvisation, no amount of improvising can lead the markets from one climax to the next in a fairly predictable manner, with an occasional twist.
Perhaps it’s best to come at the question of what type of person makes it as a trader from a different angle by extending the word person to personality and ask what ‘hirers’ look for in potential traders. I recall a conversation from the horses mouth so to speak, a retired banker responsible for a team of equity traders;
I ignored background when hiring traders. I cared more about how sharp they appeared, whether their personality traits allow them to be sustainable, responsible, disciplined, prepared, agile, focused. In truth the only activity that will ever teach someone how to trade is trading itself. Some backgrounds will be more useful than others, such as poker, but in the end it’s the natural ability and personality of the person that makes a good trader, not their background or qualifications.
He also ignores education;
The current hierarchical work and social system isn’t conducive to a trader’s mindset, it’s set up to produce conforming worker bees. A uni graduate is barely more likely to become a profitable trader than someone from an outlier random background. I imagine uni grads on average are slightly more intelligent, but the correlation between educational attainment levels and intelligence isn’t nearly as strong as our culture would have you believe. Our educational system can indirectly limit our potential given how we’re forced to conform.
There’s a story about the great Muhammad Ali that has stuck in my mind for years, as a Father of three I often relate it to my children. My Daughter’s at uni in the UK and my eldest Son is doing his A levels, both are doing part time bar and kitchen jobs as their first experience of work.
The exact quote is difficult to pin down but asked what he’d have done had he not been a boxer Ali said it doesn’t matter what he’d have done as he’d have been the greatest. He’d point at garbage trucks on the streets of America and say if he’d been a bin man he’d have worked hard to be the best bin man there was. I use this ‘Ali’ tale for my children to emphasis that whatever job, whatever industry you find yourself in you can always take pride in being professional and doing the job in the right way and to the best of your abilities. Approach every job (and task within that job) with the right attitude and right frame of mind. Hard work and dedication will overcome most obstacles.
These next two quotes, which are literal, perhaps indicate and illustrate what type of personality traits are required to make it as a successful self employed trader far more than education qualifications, background or previous profession;
Only a man who knows what it is like to be defeated can reach down to the bottom of his soul and come up with the extra ounce of power it takes to win when the match is even.
Champions aren’t made in gyms. Champions are made from something they have deep inside them – a desire, a dream, a vision. They have to have the skill and the will. But the will must be stronger than the skill.