The Missing Piece: The Synthesis of ‘Hard’ and ‘Soft’ Trading Skills – Part 2

Several weeks ago I wrote an article titled, Trading: An activity vs. Trader as Business Owner. The main idea was that traders are entrepreneurs. To underscore that statement, here is the definition of an entrepreneur from the BusinessDictionary.

“Someone who exercises initiative by organizing a venture to take benefit of an opportunity and, as the decision maker, decides what, how, and how much of a good or service will be produced.

“An entrepreneur supplies risk capital as a risk taker, and monitors and controls the business activities. The entrepreneur is usually a sole proprietor, a partner, or the one who owns the majority of shares in an incorporated venture.

“According to economist Joseph Alois Schumpeter, entrepreneurs are not necessarily motivated by profit but regard it as a standard for measuring achievement or success.

“Schumpeter discovered that they
1.    greatly value self-reliance,
2.    strive for distinction through excellence,
3.    are highly optimistic (otherwise nothing would be undertaken), and
4.    always favor challenges of medium risk (neither too easy, nor ruinous).”

And last week, I wrote the article, The Missing Piece: The Synthesis of ‘Hard’ and ‘Soft’ Trading Skills – Part 1. I reference both of these because in this article I build on the main idea that, in most cases, as an entrepreneur you are a lifestyle entrepreneur.

The online BusinessDictionary defines lifestyle entrepreneur as:

“An individual that creates a business with the purpose of altering their personal lifestyle and not for the sole purpose of making profits. A lifestyle entrepreneur focuses more on the life rewards provided to people that enjoy and have a passion for what they are doing. There is a possibility that the business will do particularity well since the individual has a passion for what he/she is doing.”

As a lifestyle entrepreneur, you are continually:

•    learning and gaining expertise with things important and relevant in your life
•    thinking about your options and ways to improve things
•    gathering, processing, and prioritizing information from multiple sources
•    making choices and decisions to increase the quality of your life and your business
•    allocating, managing, and capitalizing on your T-E-a-M (time, energy, and money)

More importantly, you achieve your goals and objectives primarily through the application of your soft skills. Also known as core competencies, soft skills are essential to navigating most of life’s daily activities such as solving problems, making decisions, processing information, acquiring knowledge and expertise, as well as managing time and energy. As important as they are to life, they are also of the highest importance in your trading.

For most traders, their primary focus is on trading performance activities:

•    interpreting market activity
•    identifying potential trading opportunities
•    determining ‘ideal’ trade entry location
•    calculating what to risk versus potential reward
•    when, where to adjust an open position
•    when, where and how to exit an open position

Yet, when you really look at each of these actions, the hard skills of trading, the result of each is directly related to your proficiency in using the soft skills of trading.

Based on my experience, you must invest in increasing your proficiency in the knowledge and use of soft skills to raise the bar on your trading performance.

As noted last week, I promised to focus on ideas for developing your own Skills Database. The first step is to catalog and organize information, exercises, ideas and any item relevant to the skills you want to increase in proficiency. Below are five soft skills with thoughts on each of what you may want to include in your Skills Database.

Learning Skills

Your learning process is a collection of key best practices you have learned, such as:
•    Define what you want or need to learn.
•    Clarify the purpose of what you want to learn.
•    Know when and where you best learn.
•    Know your primary learning style.
•    Determine who will help you learn.
•    Define your best learning practices.
•    Develop a dynamic learning plan.
•    Consistently adhere to your learning plan.

Thinking Skills

In today’s headline, sound bite, and bullet-point world, we often rely on only one thinking style. However, whole-brain thinking, the synthesis of the left and right brains, two distinct thinking styles, produces better results. While it demands more time and energy, the benefits typically outweigh these costs. To increase your ability to whole-brain think:
•    Understand the attributes of both styles.
•    Discover the optimal applications of each.
•    Select the attributes that best fit you.
•    Use mind maps to facilitate intuitive thinking.
•    Use checklist to facilitate rational thinking.
•    Use exercises to facilitate synthesizing both together.

Information Processing Skills

Efficient information processing is not an option in today’s information-overload world. For those who trade, the ability to accurately and quickly process information is a requirement. Increasing your ability to collect and process information requires the:
•    Awareness of your information or knowledge gaps
•    Collection of various types of information
•    Understanding the best application for the information
•    Relevance and importance of required information
•    Prioritization, timing, use and consumption of information
•    Recognition of what you have to gain from it

Decision-Making Skills

Your trading decision-making process is an essential element in succeeding as a trader. High-probability trading is the result of your skills and experience in whole-brain thinking and information processing. Your decisions affect everything. You make better decisions when you know:
•    Why you want or need to make this decision
•    Why you want or need to make this decision now
•    How the results of this decision impact you and others
•    How to clearly re-state the decision you want or need to make
•    The goals this decision will advance or satisfy
•    You have the required information you need to decide
•    What and/or who are your primary resources
•    Who else can help you the most with this choice or decision
•    Your most important and relevant resources
•    The expected result, or primary benefit, of this decision
•    The requirements or limitations imposed by this decision
•    The priority level of this decision
•    The long term impact of this decision

Time Orchestration Skills

Time orchestration or time management is really about managing yourself. Ultimately, how you allocate your time is the result of a personal decision. When it comes to the orchestration or management of yourself and your time, remember that your personality and preferred style play a large part. To really understand your style, and therefore what is detrimental to your productivity and accomplishments, think about the degree to which you:
•    Value time in general as well as your own time
•    Prioritize, schedule, allocate, and manage your time
•    Calculate the return on the time you invest
•    Adhere to start and stop schedules you set
•    Capitalize on your most productive energy periods
•    Maximize the time you allocate to trading
•    Utilize your discretionary blocks of time

Steven Pressfield, in his book, Turning Pro, says, “The difference between an amateur and a professional is in their habits. An amateur has amateur habits. A professional has professional habits.”

I believe Steven is right in that our habits, the way we do things on a consistent basis, dictate a large part of the results we achieve. That being true, what do you believe your trading performance results would be if you made a habit of ongoing increased proficiency in your soft trading skills?

Assuming you adhered to those habits, I recommend you also continually ask and answer questions, like these below, on a daily, weekly, or monthly basis to help increase your trading skill set.

1.    What are three things you can do right now to improve your ability to identify high-probability trading opportunities?
2.    What are three things you can do right now to improve your ability to enter a position?
3.    What are three things you can do right now to improve your ability to manage an open position?
4.    What are three things you can do right now to improve your ability to exit a position?

In conclusion, I offer a few additional suggestions as you build your soft-trading and life skills.

  • A determined mindset is an essential starting point for embarking on the process to in-crease your trading expertise.
  • List and prioritize the skills you want to gain in proficiency.
  • Draft a plan of your learning sequence that includes your course of study and learning style.
  • Avoid abandoning your plan prior to reaching your goals by checking it against the principles of ‘Kaizen.” (See Robert Maurer’s books.)

“The five essential entrepreneurial skills for success: Concentration, Discrimination, Organization, Innovation and Communication.” —Harold S. Geneen, CEO of ITT

As always, I invite you to consider taking yours soft skills as a trader to a new level by participating in our ExceptionalTrader Core Skills Workshop.

Until next time . . .

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