{"id":9918,"date":"2022-09-29T11:05:14","date_gmt":"2022-09-29T15:05:14","guid":{"rendered":"https:\/\/optimusfutures.com\/tradeblog\/?p=9918"},"modified":"2022-09-29T11:05:14","modified_gmt":"2022-09-29T15:05:14","slug":"trading-success-intelligence","status":"publish","type":"post","link":"https:\/\/optimusfutures.com\/blog\/trading-success-intelligence\/","title":{"rendered":"Why Smart People Don\u2019t Always Make For Good Traders"},"content":{"rendered":"

This article on trading success is the opinion of Optimus Futures.<\/p>\n

\"trading<\/a><\/p>\n

Some people believe that you need to study finance or have a lot of money to find trading success.<\/p>\n

The truth is, education doesn\u2019t play as big a role as you\u2019d think. Neither does how much money you start off with.<\/p>\n

There are plenty of incredible traders who lack any type of formal education.<\/p>\n

Some of the most intelligent people make for bad traders.<\/p>\n

So, why is it that intelligence doesn\u2019t equate to trading success?<\/p>\n

As you\u2019ll soon find out, it\u2019s far less about intelligence than you might think.<\/p>\n

When Genius Fails<\/h2>\n

The main reason why many smart people don\u2019t succeed in trading is simple.<\/p>\n

Markets are irrational at times.<\/p>\n

An intelligent person often looks for answers to why certain things happen, but the futures market is often driven by emotions like fear and greed.<\/p>\n

Try putting a math genius into a behavioral field like psychology, and you\u2019ll see what this in action.<\/p>\n

It\u2019s not like school, where you can study hard and know you\u2019ll do well on the test.<\/p>\n

Volatility in the futures market is often driven by catalysts.<\/p>\n

When news catalysts hit the wire, there\u2019s something called \u201cprice discovery.\u201d That\u2019s when traders, in real-time, are trying to decipher the impact of the news and how it will affect the price of the futures contract.<\/p>\n

You can\u2019t know the outcome of the events before they happen. Only the probabilities. And even then, much of the skill lies in reacting, not anticipating.<\/p>\n

For example, if OPEC+ has a meeting where they announce they\u2019ll be cutting oil supply, we can assume that the news is bullish for crude oil prices. After all, a lower supply should drive prices up.<\/p>\n

However, how bullish is it for the price of oil? That\u2019s where \u201cprice discovery\u201d takes place.<\/p>\n

On the other hand, what if traders were expecting OPEC+ to cut oil supply ahead of the announcement?<\/p>\n

In this case, the price of crude oil futures may have already risen well ahead of the announcement. When the announcement is made official, it does little to the price of crude oil.<\/p>\n

When an event is priced in, traders often say, it\u2019s \u201cbaked in\u201d already.<\/p>\n

Extending the oil example, if traders expected OPEC+ to cut oil by 400,000 a day and OPEC+ decides to go with 200,000, oil prices might plummet even though supply is being removed.<\/p>\n

Being too logical in an irrational market<\/a> can be a detriment in trading.<\/p>\n

Another issue intelligent people have is that they\u2019re used to being right. Some strategies in trading can be profitable, even if the win rate is 40%.<\/p>\n

How?<\/p>\n

If those 40% winning trades post larger profits than the 60% losers, that\u2019s how.<\/p>\n

You have to be able to accept that you\u2019ll be wrong in futures trading. And that\u2019s a hard pill to swallow for some folks who are used to always being right.<\/p>\n

Lastly, patterns can take time to develop and aren\u2019t always present in every market.<\/p>\n

Imagine if you started trading in 2008 and learned how to become successful based entirely on your tenure in a bear market. How well would that serve you in the following decade?<\/p>\n

Risk Tolerance<\/h2>\n

If you want to succeed at trading futures,<\/a> you must have a high tolerance for risk. Some successful people just don\u2019t have it. The idea of losing money just doesn\u2019t sit well with them.<\/p>\n

This is common with highly skilled professionals where there is little margin for error.<\/p>\n

The idea of risking $1 to make $3 might not appeal to you when you can just work and make a steady income.<\/p>\n

And as mentioned earlier, it can be a real bruise to the ego if you\u2019re used to being right in your other profession.<\/p>\n

The most successful traders are humble and understand that drawdowns are part of the game.<\/p><\/blockquote>\n

Personality<\/h2>\n

A poker player is likely to make a better trader than someone who is a doctor.<\/p>\n

A business owner is likely to make a better trader than a lawyer.<\/p>\n

Why?<\/p>\n

Because they understand the concept of risk vs. reward<\/a>.<\/p>\n

There are no guarantees in the business world, the same is true in trading.<\/p>\n

Hard work alone is not enough. You can work hard, but if you are trading the wrong strategies, and don\u2019t have a trading plan, then you\u2019re likely not going to find trading success.<\/p>\n

The highly skilled professional is used to getting results from hard work alone.<\/p>\n

Unfortunately, in trading, you\u2019ll need more than just hard work. That\u2019s why it generally makes sense to work with an experienced professional who can guide you along the journey.<\/p>\n

Be Like Water<\/b><\/h2>\n

Successful futures traders are flexible. They pick up on trends and take advantage of them. However, they know that the trend can change, and adjustments will need to happen.<\/p>\n

Some people love math because, typically, there is just one right answer. The answer in trading always changes.<\/p>\n

Short-term trading is often driven by emotions, more so than fundamentals.<\/p>\n

So many times, people want a formula\u2026If I do X, can I expect Y result?<\/i><\/p>\n

But the futures market is too dynamic for that.<\/p>\n

And here\u2019s the thing. You can have a great idea in trading, but if you fumble your execution, you can end up losing money.<\/p>\n

Or you can have the right idea, but you decide to trade something that isn\u2019t liquid, which ends up robbing you of your gains.<\/p>\n

The key is to be flexible and open-minded.<\/p>\n

What It Takes To Succeed<\/h2>\n

We\u2019ve spent a great deal of time discussing why being intelligent doesn\u2019t always mean you\u2019ll succeed at trading.<\/p>\n

The point isn\u2019t to knock smart people or say you have to be of average intelligence to succeed. It\u2019s that intelligence doesn\u2019t play as big a role as some might think.<\/p>\n

So what does matter?<\/p>\n