A few years ago I had lunch with Larry Connors (who is a well-known trader and runs the website TradingMarkets.com).  We were talking about what makes great traders great, and what causes some of them to get in trouble.

Larry said he believes that many people with a real "edge" fail to exploit it because they get bored.  The personality trait that helped them develop their system often leads them astray; they focus on finding new things rather than on making money with what they know works.

As I think about this, I have a slightly different explanation.  Most systems with an "edge" only have a small edge.  That means that successful traders suffer frequent set-backs, drawdowns and situations where they did everything right, but still lost money.  It is natural for them to use their natural talents to avoid unnecessary pain, right?

Most successful businesses balance operational excellence and making money now with research and development (which helps ensure that they will make money in the future).  So, it makes sense that the best traders continue to grow, learn, and make new and better distinctions.

One of the Siren songs of trading, though, is that the fear of losing has so much gravity that it often pulls focus from more productive endeavors.  In other words, there is a difference between "working on a problem" and "working towards a solution."

Focusing on what you are trying to avoid is distracting and painful.  In my experience, the best results come when the focus is on what you want.

A few years ago I had lunch with Larry Connors (who is a well-known trader and runs the website TradingMarkets.com).  We were talking about what makes great traders great, and what causes some of them to get in trouble.

Larry said he believes that many people with a real "edge" fail to exploit it because they get bored.  The personality trait that helped them develop their system often leads them astray; they focus on finding new things rather than on making money with what they know works.

As I think about this, I have a slightly different explanation.  Most systems with an "edge" only have a small edge.  That means that successful traders suffer frequent set-backs, drawdowns and situations where they did everything right, but still lost money.  It is natural for them to use their natural talents to avoid unnecessary pain, right?

Most successful businesses balance operational excellence and making money now with research and development (which helps ensure that they will make money in the future).  So, it makes sense that the best traders continue to grow, learn, and make new and better distinctions.

One of the Siren songs of trading, though, is that the fear of losing has so much gravity that it often pulls focus from more productive endeavors.  In other words, there is a difference between "working on a problem" and "working towards a solution."

Focusing on what you are trying to avoid is distracting and painful.  In my experience, the best results come when the focus is on what you want.