What It Takes To Be A Complete Trader With Competence
Feb 25, 2021
What is competence? In a very simple way, competence means that you have the ability to do something well and possess the needed knowledge to get it done . You are capable of performing a task or a job effectively. In contrast to intelligence, which is very subjective, competence is straightforward and transparent. Competence on a task or job means that you have some ways of thinking, knowledge or behaving that matter for performance on that task.
For example, if you’re a seller, then your ability to establish trust with customers affects the sales you make. Being able to establish credibility is an important part of your competence in that job.
If you’re a scientist, then your ability to notice puzzles and dig into them affects the discoveries you make. Inquiry and related intellectual strategies are an important part of competence in that job.
But...how about traders? Let's look at what it means to us, legends, first.
Studies have shown that information seeking is a competency shown to be relevant to successful performance. Hmmm? Do traders use it everyday? It’s a general cognitive skill that’s been proven to matter greatly. It can be broken down to a more refined list of knowledge items and skills, such as the specific search strategies/analysis traders use daily to develop trading plans.
One skill every trader needs, is the ability to analyze data quickly. There is a lot of math involved in trading, but it is represented through charts with indicators and patterns from technical analysis. Consequently, we can all agree that traders need to develop their analytical skills, which will improve their competence, so they can recognize trends in the charts.
Traders must have a healthy thirst for information and a desire to find all the relevantdata that impacts their trades. Many traders create calendars of economic releases and set announcements that have measurable effects on the financial markets. By being on top of these information sources, traders are able to react to new information as the market is still digesting it.
What do I think? Let me give you some insight on the different levels of competence. There are many more layers but I will focus on the following because I believe they are progressive in nature. We all move through these phases until we reach the trading nirvana.
Crazy but true. When you don’t know what you don’t know, how do you know what you don’t know.
Traders in this stage know their limits to a point. They might not realize that their knowledge base is much smaller than what they need in order to be successful. They do not have the knowledge to see the hidden risks in the markets. Markets are much more dangerous than they appear to be. They are vulnerable to risks or missed opportunities because of lack of knowledge.
At this point the traders understand and recognize the opportunities (what they do not know), as well as the value of a new skill in addressing the deficit. The making of mistakes are integral to the learning process at this stage. No one learns without making mistakes. This is life. I know it is humbling but we have to learn to live with it.
It is about acting on knowledge, what works and building on it. The trader understands and knows (via acquired knowledge) what to do . However, executing, demonstrating the skill or recalling knowledge requires concentration and heavy conscious involvement.
Here the traders know how to place a series of well-executed trades, know how to identify it, contextualize it, and execute. More importantly they understand the boundaries and limitations of their methodology.
In simple words, a trader is aware of strengths and weaknesses and is working toward expanding the current skills by executing the acquired knowledge. Execution may be somewhat mechanical but the trader is on the way to an intuitive function. Enough time, practice, and continued learning will lead to optimal functionality.
Finally the trader has had so much practice (and learnings) that trading becomes "second nature.” They can perform all tasks and analysis easily to the point that they don’t even know how good they are and the entire process has become somewhat intuitive.
The trader is very disciplined, focused, committed and is able to focus on different potential angles at once, from various technical and fundamental perspectives to variances by way of position management and execution.
The trader is able to work with advanced strategies (whether a defensive or offensive money management strategy is more suitable for a given trade), is able to seamlessly switch between technical approaches that may be incompatible with one another and is able to do this confidently and with a great degree of certainty (whether the trade actually works out favorably or not).
The unconsciously competent trader is able to execute trades with a level of skill that no longer requires a mechanically burdensome effort. Trading has become “second nature” to the practitioner. This is trading nirvana!
Remember, we evolve everyday and we must evolve everyday because the whole point of being a great trader is to become the complete trader.
Now let’s take a look at this in a more holistic way.
As I had stated in my earlier blog, let's not forget that before you are a trader, you are a human being with many responsibilities. Family, work, friends, bosses, significant others and many other responsibilities and the pressures that come with them and being competent (part of your daily performance) has an impact on them as well..
So how to become competent…at work and in life ?
We all admire people who display high competence, for example athletes, successful businessmen, traders, thinkers and so on.
Here are some common traits all competent people have in common:
They show up every day. They are ready to play everyday, no matter how they feel, what kind of circumstances they face or how difficult they expect situations to be.
They keep improving every day. They do it by asking “WHY”. The person who knows how, will always know how to do it but the person who knows “WHY” will always understand the root cause and make better decisions, provide correct alternatives, and make adjustments if the original plan proves insufficient or incorrect.
They follow through with excellence. Performing at a high level of excellence is a choice. Quality that leads to success is never an accident. It is the result of high intention, sincere and relentless effort, intelligent direction, competence and skillful execution. They expect that and a lot more from themselves.
They accomplish more than expected. Highly competent people always go the extra mile. Good enough is never good enough. They need to to successfully accomplish the tasks again and again, day in day out.
They are inspirational. Highly competent people do more than perform at the highest level. They inspire and motivate everyone around them. They do not only survive on skills. They combine their skills with competence to achieve new levels of excellence and influence. They are confident.
Confidence and competence is a very dangerous mixture. It leads to unmitigated success.
Confidence is when you think you can do it, competence is when you do it. Being confident and competent is what makes the difference at the frontline.
How do we improve our competence? I suggest you do the following.
Get your head in the game. If you have been mentally or emotionally detached from your work/relationships/family/life, it’s time to get engaged again. Rededicate yourself to all those things you must do to be successful. Be disciplined and give your undivided attention and time. Ask yourself "Why” you have been detached. Do you need new challenges? Are you in any type of conflict (home, work, relationship)? Check your place in the mood elevator and identify the problem and develop a solution to solve it with commitment and discipline.
Redefine the standard. If you don't have one, set the standard. If you are not consistently performing at a higher level, review your standards or plans. What is missing? Are you cutting corners? Are you working on your plan? Are you executing with discipline? Are you asking “WHY?” Hit your mental reset button, go to the mood elevator, set a more demanding expectation for yourself. Hold yourself accountable.
Find ways to improve. No one improves without being intentional about it. Find things you can do to improve your knowledge and skills. Dedicate time and money to follow through on them.
You are only as good as your own standards. In life you will always be competing against yourself (even more when you are trading). So …. It comes natural asking yourself…
When was the last time I gave a task my absolute best when no one but only I would know about it? When was the last time I challenged myself to the most difficult challenge I ever had and come on top. Answer honestly and…be brave enough to do the right thing for you and others. Be competent. It leads to amazing success.
Now that you are armed with self discipline, focus, commitment and competence go ahead and...
Trade competently with confidence.
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