Profiling a Master Traders’ Minds

Leading investigation agencies like the FBI use specialists called ‘profilers’ who analyze the crime scene, define the criminal’s behavioral patterns, and put together cues about the criminal’s profile. Profiling helps investigators find some of the most dangerous criminals by classifying their behavioral characteristics and understanding the art behind the crime.

Using the same profiling method, we can analyze the behavior and thinking patterns of successful traders. In this case, it will merely help you become a better trader. 

The Mind Hunters

‘Mindhunter’ is one of the most successful shows on Netflix, and it follows FBI agents studying criminals in other words, ‘mind hunting’ them. We decided to mind hunt some of the world’s most famous traders. We handpicked these three traders for this mind-hunting project. 

• Steven Cohen – American investor with a net worth of $14 billion
• Andrea Unger – Four-time world champion of futures trading
• Jim Simons – an American mathematician, turned hedge fund manager.

We did extensive research about these three famous personalities by going through all the material we could put our hands on interviews, trading style, their responses to wins and losses, and more. Based on our research, we created a profile for each of our traders. We weren’t surprised to found out that all three of them share traits regarding their trading style. 

1. They choose common sense if

It’s a general belief that successful traders have developed complex strategies and ingenious execution methods. But this research proves the opposite. They’ve applied common sense and simplicity to their trading strategies and decisions.

(a)   Their recipe for success is common sense Jim Simons always says, “Never do anything that is against common sense. You do not need anything other than common sense to win.” If you look at why you made a loss, you will find that you did something that isn’t common sense in most cases.

(b)  Simplicity first, Steven Cohen, who follows a zen-like simplicity, once said that he would like to keep it simple by looking only at the win/loss percentage and the risk/reward ratio. Simple things make it easier to spot mistakes, require less effort and have better results. 

(c) Stick to the obvious Andrea Unger believes that people miss the obvious because they think in long complex lines.

Sticking to common sense keeps their mind uncluttered and helps them make faster, more efficient decisions.

The lesson to be learned here is “never underestimate the power of common sense!”

3. They’re masters of risk management

Risk management is indispensable for success, and all these three professional traders agree. They do extensive preparation to hone their skills in risk management. They research the market and use mathematical calculations to determine the risk involved. More importantly, they learn how to weigh risks in particular trade in the first place. 

Steven Cohen even went to the extent of hiring an Olympic psychiatrist to get better at risk management. We often hear from traders is ‘I’m confident the market will turn around’. This is merely positive thinking. These master traders understand their strengths and weaknesses and design clear-cut strategies that will work long-term despite making losses on some trades.

Their confidence is in their ability to adapt their strategy to market conditions and handle losses. This confidence is realistic; it stems from a deep understanding of the markets and solid trading skills. This is the kind of confidence that helps you take decisive action on the trading floor. 

These three personality traits are a big part of our top traders’ profiles. Now you can go ahead and profile your favorite traders and carve out the skills that make them who they are.