Do Your Homework: 3 Trading Skills to Cultivate on Your Own

Today, we will discuss a few trading skills you can actively develop on your own. Be forewarned we are not talking about learning to somehow time the markets or become a Quant. We want to talk about trading skills that will help you add knowledge. This will help you look at the market from new and different perspective. 

Takeaways

• How can trading skills improve you?

• Learn to use crowd psychology to your own advantage

• How your interests will develop your skill set

A Healthy Curiosity in Trading Skills is Needed...

Perhaps besides "How do I become a successful trader myself?" the next most popular question on the minds of traders is always "What is it that makes the best traders in the world so successful?". So much has been written and even made into film about the world's best traders. It is both easy and fun to learn more about these individuals and their trading methods. Jesse Livermore is an example; perhaps history's most famous trader. George Soros is famous for being the man who "broke The Bank of England" for a $1 billion profit in 1992. Or Paul Tudor Jones, who amassed his fortune shorting stocks during the 1987 crash. Or Richard Dennis and the famous Turtle Traders.

There are even Infamous Traders!

There is even a whole class of infamous traders. Nick Leeson is a famous example. He was a rogue trader who brought down Barings Bank. You also have modern-day Ponzi schemer Bernie Madoff.

There is also so much available on investing icons as well. Traders such as  John Templeton and Warren Buffett, just to name a couple.

Also read: A Disastrous Losing Trade…and the Great Trader Who Took it

So our advice: Seek out knowledge and information on the world's best traders. This can be on the Internet, or in books like Reminiscences of a Stock Operator. You should also see anything written about or produced by the good traders themselves.

Develop and feed your appetite for information on what made these traders "tick,".  Never stop thirsting for knowledge about who else, and what else, is out there.

An Understanding of Crowd Psychology

You might be surprised to learn that most every successful trader I've ever known also devoted time and energy to studying crowd psychology. This is not specific to the markets at all. Actually, it is more about the psychology behind mobs and riots!  How can that help your trading, you wonder? Well, think about what it is that ultimately drives price action in the markets. It is not sentiment indicators, technical analysis, or Forex news by itself! Actually, price action in any financial market is driven almost entirely by human emotions. These can include trading fear, greed, and even panic. This is not the same psychological responses we stand to learn about by studying the mentality of crowds. And there is no shortage of places to learn about it, either.

In fact, well-known books on the subject may include The Wisdom of Crowds and Markets, Mobs, and Mayhem.  Both of which address (indirectly, of course) the same human nature that drives markets. This is whether under "normal" conditions, or amidst the manic volatility seen in "crash," "bubble," or "crisis" scenarios.

See also: Is Another Financial Crisis Your Biggest Fear?

Developing an understanding of crowd psychology may give way to an entire host of new trading skills. This can be the ability to remain calm and composed under pressure. It can also mean more confident trading amidst the kind of volatility that can threaten the careers of less-experienced traders. Uncommon knowledge can provide a useful edge in the markets throughout your day-to-day trading endeavours.

Discipline & Sharper Focus

Even intraday traders and those who maintain more intensive schedules in the markets must find time to devote to health and wellness. Many actively meditate, practise yoga, or study martial arts. Any or all of which are activities we would recommend for Lazy Traders as well. Beyond the exercise benefits, though, these activities place a heightened emphasis on discipline, repetition, focus, and using the mind's own power. This helps create a healthy consciousness and clear our psyche of negative energy. Need we say any more about how and why those are all useful trading skills?

So read up on martial arts principles, particularly the call for extreme discipline and focus. Try a yoga class, or safely impart exercise into your daily or weekly routine as a healthy outlet. This will reduce the stresses and frustrations you may encounter both in trading and in life. Lifestyle trading lends itself well to outside opportunities such as these. This is because of the nature of trading the markets. There are indeed many parallels—especially on the mental side.

Conclusion

Learning about those traders (and investors) is a truly fascinating endeavour. If you participate in copy trading, why not study how the trader you are following is successful? Understanding how they approached the markets, and the actions that would ultimately make, and in some cases, break them. This will stimulate your mind and perhaps even strengthen your desire to learn about and trade the markets.