The Mental Strategies of Top Traders

An honest depiction of the challenges of trading and a clear explanation of what it takes to succeed

Trading tends to be a winner-take-all activity where a small number of traders are very successful, while the majority either lose money or generate relatively small profits. In The Mental Strategies of Top Traders, author Ari Kiev identifies and analyzes the characteristics of successful traders and shows you how to cultivate these same characteristics.

Successful trading, Kiev asserts, requires an unusual and sometimes contradictory blend of intellectual and psychological abilities, including the willingness to take risks, but in a very controlled manner; the discipline to develop high-conviction trading ideas in the face of unpredictable markets and incomplete information; as well as a strong drive to win, but also accept failure. Here, you'll discover how to achieve all this, and much more.

• Provides advice and solutions for traders struggling with today's volatile and stressful markets
• Authoritatively identifies key mental strategies of top traders
• Written by Ari Kiev, a highly respected figure in the professional trading community
• Analysis is supported by comments from contemporary traders and portfolio managers, many of whom struggled with the markets of 2008

Designed with the serious trader in mind, this book will put you in a better position to excel in today's tumultuous markets.

Acknowledgments xi

Introduction 1

CHAPTER 1 Intellect, Instinct, and Guts: Understanding the Psychological Profile 7

A History of Success 14

The Ability to Take Risk 15

Creativity and Originality 16

Self-Awareness, Self-Control, and Resilience 17

Teaching Traders Self-Assessment and Self-Control 18

Teamwork and Leadership 19

Putting It All Together 21

Case Study on Finding the Right Candidate 21

Job Requirements 21

Potential Candidates 22

The Bottom Line 25

The Perfect Candidate? 26

Chapter in Review 27

CHAPTER 2 Planning for Action: The Importance of Goal-Directedness 29

Making a Plan 30

Case Study on Setting a Goal 31

Case Study on Having a Variant Perception 35

Personality Factors and Goal-Setting 42

Recognizing Goal-Directed Individuals 44

Case Study on Recognizing Goal-Directedness 47

Fred’s Strengths: The Three Cs 47

Fred’s Weaknesses: The Three Is 48

Goal-Directedness in Turbulent Times 50

Own Your Stuff 51

Review the Game Films 51

Switch Gears? 52

Be Realistic 52

Stay True to Your Strengths 52

Maintain Focus 53

Chapter in Review 54

CHAPTER 3 ‘‘Fire in the Belly’’: The Ability to Take Appropriate Risk 57

A Picture of Successful Risk Management 57

Trading Philosophy 59

Handling Drawdowns 59

Head versus Heart 60

Reviewing Risk Statistics 60

Examining Personality Factors 63

Learning to Upgrade Your Performance 71

Chapter in Review 77

CHAPTER 4 Thinking Outside the Box: The Importance of Ingenuity 79

Case Study on the Satisfaction of Creative Thinking 80

The Strategic Thinker 81

Case Study on Learning to Be Creative 82

Idea Construction 88

Developing a Variant Perception 88

Case Study on Creative Thinking 89

Idea Evaluation Checklist 92

Defining Expectational Analysis 94

Case Study on Knowing the Business 95

Case Study on Expectational Analysis 100

Raising Your Conviction 103

Idea Velocity 105

Idea Timing 105

Idea Completion 106

The Psychological Dimension 109

Case Study on Communicating Effectively 111

Chapter in Review 114

CHAPTER 5 Separating Emotions and Decisions: The Ability to Be Self-Aware 117

Case Study on the Emotion of Drawdowns 118

The Source of Fear 121

Case Study on Trading Stress 123

Self-Esteem and Self-Discipline 125

Learning from Drawdowns 128

Case Study on Self-Assessing During Drawdowns 129

Getting Comfortable with the Uncomfortable 131

Case Study on Being Comfortable with Discomfort 132

Teaching Traders Self-Assessment and Self-Control 136

Managing Stress Well 136

Chapter in Review 140

CHAPTER 6 Nurturing Team Players: Listening, Learning, and Working Together 143

Characteristics of a Team Player 144

Responsible 144

Positive and Encouraging 145

Competitive 148

Coachable 149

Finding Complements to Your Team 151

Case Study on a Comparison of Traders 153

The Importance of Communication 155

Chapter in Review 159

CHAPTER 7 Leadership: Directing Success 161 Empowering a Culture of Change 162

Case Study on Creating a Culture of Change 162

Encouraging Responsibility 171

Case Study on the Challenges of Responsibility 173

Exploring Potential Leaders 176

Case Studies on Finding Potential Leaders 177

Endeavoring for Success 183

Case Study on a Failure to Lead 184

Chapter in Review 189

Index 191

Ari Kiev (Park Ridge, NJ)?is a psychiatrist who specializes in stress management and performance enhancement. Kiev has had a distinguished career in psychiatry. He is president of the Social Psychiatry Research Institute and is recognized worldwide for his pioneering work in transcultural psychiatry, suicidology, and psychopharmacology. Kiev has counseled Olympic athletes on how to achieve states of peak performance in athletic competition. In recent years, Kiev has worked with many traders on issues of stress management, goal setting, and performance enhancement. He has worked extensively with Steve Cohen's multi-billion dollar SAC Capital Advisors.

Trading tends to be a winner-take-all activity where only a small number of traders are truly successful. Nobody understands this better than author Ari Kiev. Over the course of his career, this respected psychiatrist and trading coach has seen firsthand how challenging the financial markets can be. Now, with The Mental Strategies of Top Traders, Kiev identifies and analyzes the characteristics that can improve your trading endeavors and shows you how to cultivate them to gain that much needed edge.

Filled with in-depth insights and expert advice, this reliable resource carefully examines the issue of successful trading by looking across a broad range of skill sets that are an essential part of this discipline—including, among other things, a goal-oriented strategy, risk management, creative thinking, and a capacity for collaboration and leadership. Kiev supports his approach with interviews from contemporary traders and portfolio managers—many of whom struggled during the financial crisis of 2008, but survived—as well as case studies that provide a real-world picture of what it really takes to make it in today's markets.

Page by page, Kiev explains how aspiring traders can develop the qualities that lead to trading success by establishing "stretch" goals; cultivating a sense of variant perception in order to develop unique trading ideas; avoiding emotional decisions; maintaining a sense of urgency about producing results; and increasing effort in times of mental stress and market volatility. Along the way, Kiev also examines:

• What you must do to become aware of your own psychological makeup and counter the hardwired inclinations of risk aversion
• How you can function in the realm of probabilities—which is a significant part of the trading and investing world
• How to build on existing personality strengths so as to develop the ability to function in a goal-oriented way, learn to cut losses, and maximize winning bets
• Which psychological traps interfere with becoming a better trader and how you can overcome them
• And much more

Whether you're a seasoned financial professional or an active individual trader, understanding the connection between trading and psychology can increase your chances of success. With The Mental Strategies of Top Traders as your guide, you'll quickly discover how to improve your chances of winning in today's increasingly unpredictable markets.