The Mental Strategies of Top Traders: The Psychological Determinants of Trading Success

1.3. CREATIVITY AND ORIGINALITY

Most of us are driven more by consensus than by thinking outside the box. In order to make money in the markets, a trader needs to know something that others don't know yet. So, when you are considering a candidate's potential, you must think about his thought processes.

• Does he have the ability to think abstractly and creatively and to make predictions based on imperfect and incomplete information?

• Can he function in the realm of the variant perception, where he sees nonconsensus, nonlinear, and creative investment opportunities?

• Does he have a high tolerance for ambiguity and uncertainty and a willingness to dig in deeply to understand more about a company and its product cycles, or margin expansions, or management changes or other drivers of value, than anyone else in the world?

• Is he comfortable with nonconsensus viewpoints?

• Does he take pride in his ability to function quite independently of the herd?

The ability to do this is clearly helped by the quality of work done to support investment efforts. When a trader has a high degree of abstract reasoning ability and the ability to think creatively, he is more likely to generate original investment ideas at a sufficient velocity to keep pace with allocated capital and stretch targets.

The successful trader should also be able to troubleshoot and solve problems in his area of expertise. Ideally, he should be decisive, especially when there is limited information to make an investment decision or to ...