Understanding Elite Performance




Who Is James King?

I recently listened to the latest episode #214 of Chat With Traders where Aaron Fifield interviewed James King – and the episode was filled, as usual, with brilliant insights and wisdom.


James was first interviewed by Aaron back in 2017 (Episode #133).

At the time he had just left a London-based commodity trading firm where he had worked under the title of “Performance Director” – a role where he guided the traders who worked at the firm on how to achieve maximum performance and optimal results.

Since leaving the firm he has gone on to advise specialist military units, professional sports teams, ivy league university classes, as well as other organizations and companies – and continues to guide proprietary traders and fund managers on how to best beat the markets by playing to their strengths and mitigating their weaknesses.

Simply put: James has dedicated his professional life to becoming an expert at understanding what drives elite performance in human beings. Not just in trading and investing, but in all areas of life.

And now, four years later, James is back – and has even more insight and wisdom to offer in regards to understanding (and achieving) elite performance.

Today’s blog post will summarize and break down the concepts James speaks of while he details what kind of information to expect out of his recently published book “Accelerating Excellence”.




Defining Performance

Before we can understand how to achieve elite performance, as Aaron suggests in the beginning of the interview – it’s important to understand and objectively define exactly ‘what’ performance is in the first place.

James breaks down performance into three key areas:

  • Quality or Completeness
    • Example: an Olympic gymnast scoring a 10/10 is a more complete performance than 9/10
  • Cost (eg. time, finances, resources, effort, willpower)
    • Example: if we can get that gymnast scoring 10/10 with 3000 hours worth of training versus 6000 hours, then we’ve theoretically reduced cost and maintained performance
  • Speed
    • Example: speed is that time from initiating the completion of a given task to the accomplishment of that task. You might also look at repeatability (ie. can I repeat that performance on demand?)

All of these constructs play a role in the definition of performance, with performance overall being defined as the accomplishment of a given task with those three benchmarks optimized and measured across time – whether that’s making $50 million profit as a trader or winning X gold medals as an athletics squad.

James normally applies this framework for defining performance strictly to human performance and does not include the technological aspects of performance. By this he means the psychological and biological factors that we all have control of and ultimately operates the technology (or even designs and develops it in the first place).

Because even though technological performance is paramount to say a trader’s performance, that is best addressed separately to the human element since it’s really not the trader’s responsibility to develop the technology.

Unless of course they are an algorithmic trader or creating their own tools & scripts in which case the technology might be included in the assessment of performance – but even still, that’s probably best analyzed separately to that trader’s emotional and psychological performance in their processes.




What Drives Excellence?

James says in his book that ambition, hard work and talent is not necessarily the complete equation when it comes to high performance at any given task or endeavor.

“In the majority of organizations, or individuals I’ve worked with, it’s very unusual that ambition, talent or effort is the problem. Humans have been striving to get better faster since the beginning of time… I think everyone has the drive to excel in one area or another.”

James uses the analogy of hardware vs software. He observes that even though we’re all born with this incredible hardware of an adaptable brain and body, we aren’t born with the software to channel those resources we all possess optimally.

The main problem he sees people typically encounter when it comes to failing to achieve one’s optimum performance is a failure to activate their innate qualities of confidence, motivation, resilience and other psychological weaponry.

Or in other words, it’s not ambition alone that drives excellence, but a pragmatic application of one’s innate talents in pursuit of that ambition.

It’s not enough to passionately desire an outcome, or even to work really hard to achieve a certain outcome – you need to channel your abilities efficiently, consistently and optimally in order to achieve true excellence at any given task.

James points out that trading and investing as an industry in particular attracts some of the hardest working, most ambitious, most talented and cognitively gifted people in the world who are naturally geared to excel.

Most professional traders and investors have high IQs, are high in industriousness and conscientiousness, which are all psychological traits that equate to gold in terms of achieving high performance.

So the issue for most traders who struggle to get excellent results is not a lack of ambition, hard work or talent.




Why Traders Struggle:

James highlights the three main issues he personally sees most struggling traders encounter:

Struggling Traders Reason By Analogy

Most failing traders suffer from the affliction of reasoning by analogy.

They copy other traders’ methods, fall for sales pitches, lean on the best practices approved by the majority, and just generally lack creativity or originality.

What we should do instead is reason by first principles.

We need to break our problems down into their basic elements and then reassemble them from the ground up.

This allows us to eliminate careless reasoning, copy-pasting, inadequate analogies, resulting in opportunities emerging which others will miss.

Or in other words – traders who truly excel at trading are usually contrarian, original, creative, and don’t follow the crowd.




Struggling Traders Think Linearly

Traders (and people in general) tend to think in a linear fashion, meaning we expect progress to be relatively constant with the effort we invest.

We expect the curve of our performance to be a graph of a line moving from the bottom left to the top right based on the effort and time we put in to our trading, our education and our processes.

But progress is not linear.

Progress is actually an exponential process, which is why so many traders experience frustration, disappointment, and in many cases give up on themselves entirely before ever achieving any level of success.

As James points out:

“It takes one break-through to enable you to perceive the possibility of the next, and there’s a compounding effect with each bout of progress. Our inability to think exponentially in terms of our progress is what causes so many people to stay blind to what is essentially an enormous amount of potential within us.”

The inability to perceive our own potential during these frustrating and discouraging phases of our journey as a trader tends to affect the quality and quantity of effort we put in, creating a reinforcing cycle of negativity that inevitably leads to a failure to improve.

I think every trader has experienced this in their own journey at some point (no matter how successful they ended up becoming) where they felt like they were in a rut, stagnating and not improving.

The irony is, if you can push through these periods in your career as a trader, it’s usually eventually followed by a major break-through to a new level of understanding and performance.

This perception of potential (or lack thereof) goes both ways – if you perceive yourself as having enormous potential, then you are more confident and motivated to be persistent and put in the appropriate work to get there, and this leads to higher quality and quantity of outputted effort in pursuit of success.

I think this explains why so many traders who end up achieving great results usually have a mentorship figure and/or a small community or network of likeminded traders who motivated them, pushed them, and encouraged them when times got tough.

Sometimes we just need someone to tell us we can do it, and that’s enough to light the fire within.




Struggling Traders Don’t See Behind the Scenes

The final point James makes regarding why he thinks many traders struggle to succeed is the fact that we only ever see success or excellence after the fact.

We don’t see the thousands of hours that went into developing the necessary components of performing at that high level.

When we see Leonardo DiCaprio collecting an Oscar, or Lewis Hamilton winning his seventh world title, or Tiger Woods making a comeback after severely injuring his back – we don’t see the work that went in to get there. We don’t see the blood, sweat and tears that were sacrificed along the way.

We just see the trophy, and we think ‘wow, that must be nice’.

Not many of us ever experience what it’s like to be around an elite performer for any prolonged period of time, so we only ever see a fraction of what excellence really entails.

This is obviously a major problem that results in a false perception of not only what it takes to be an elite performer, but also of your own potential to achieve elite performance.

We either think that it’s easier to achieve elite performance than it really is, or we think it’s impossible. Which results in massive discouragement when we fail to perform as well as we expected to as quickly as we expected to, or we simply fail to try to achieve excellence at all.

The parts of excellence which are visible are only the tip of the iceberg when it comes to performance.

It’s the things we can’t see beneath the surface which makes the difference when it comes to enhancing your performance.

Just ask Mike Bellafiore from SMB Capital, co-founder of one of the most successful prop trading firms in Wall Street history – he speaks about lifestyle, getting exercise, getting a good night’s rest, avoiding drugs and alcohol and meditating far more than he does about sitting behind your computer screen searching for the perfect strategy.

After all, the perfect strategy is no good to you if you’re not ready and able to execute it perfectly.




The Four Principles of Elite Performance:

James has studied outliers of elite human performance for years.

After objectively and scientifically analyzing exactly what it is that sets them apart from ordinary performers, he has broken down his observations into four core principles.

#1: Understand Your Sweet Spot

This is the most important element of all the aspects that affect your performance.

Scientifically, this ‘sweet spot’ concept is referred to as self-concordance theory and is very well supported by scientific literature and research.

James uses the analogy of a tennis racket:

“Just like a tennis racket has a point at which the ball is driven further and faster away with greater force than if struck at any other point, so do you. You perform from your sweet spot when the goals that you are pursuing align with the qualities that make you unique.”

Your ‘sweet spot’ exists at the intersection of three things:

  • Your strengths
  • Your interests
  • Your values



Strengths

Your strengths are the things which come naturally to you.

This can be physical strengths or cognitive strengths. For example, you might be seven feet tall and have the athletic ability of a mountain lion, in which case you’re probably likely to excel at basketball versus racing driving.

Or you might be exceptionally talented at solving complex mathematical problems far better than the average person, in which case you might make a great quant or algorithmic trading system designer versus being a real-estate agent.

Your strengths should dictate the roles you pursue.

Let’s say you want to excel at trading.

The problem with this statement is that it’s like saying you want to excel at sport. Well, which sport?

First, if you want to excel as a trader, you need to pick a niche or a trading style that caters to your psychological strengths.

Even though the basic principles of trading are universal for all markets in existence (ie. maximize profit potential and mitigate risk), the techniques you use to achieve success can differ wildly across all the various markets and trading styles out there.

There’s a big difference between trading the commodities market using fundamental analysis or trading the forex markets using technical analysis, or between trading the crypto markets using an algorithmic system or trading stocks using options.

You need to pick a niche to focus on, and your choice should be dictated by your naturally inherent strengths.

There are many, many traders out there who would be far more successful at trading than they currently are if they stopped trying to force themselves into a box that they don’t fit in.

That being said – it’s also important to avoid perpetual strategy hopping or market hopping – it’s not always the case that you are trading the wrong market, and it takes time to develop consistency in your methodology.

You should try to specialize in whichever market and trading style you are most naturally drawn to.

Your strengths are so important because they dictate your trajectory (ie. your responsiveness to training and the likelihood of break-throughs in your performance).

Just like the pareto principle (which I’ve written about before), this is a natural law – to those who have more will be given, the best get better, and positive reinforcement leads to more positivity.

It’s important to try new things and experiment, because you never know what you might be good at. But true excellence will only come when your strengths align with your goals.

James points out that he has met many traders who are committed to the wrong style of trading and they are constantly fighting an up-hill battle.

For traders it’s important to map where you excel cognitively versus the rest in those areas, and then work out what style of trading those traits would be a powerful asset in – just like an athlete would.

To determine your strengths, just reflect on moments where you’ve historically excelled versus the rest throughout your entire life.

Ask yourself where you have or have not been highly responsive to training. As the saying goes – if you love what you do, you never work a day in your life. This is because the work doesn’t feel like work.

It can also be worth taking a personality test to discover your cognitive strengths and weaknesses. There are plenty of free cognitive tests out there which will tell you where you fall on the normal distribution curve so that you can see where your traits stand out compared to the average.

Ray Dalio recently released a comprehensive free personality test on his website which is a good place to start. You can take the test by clicking here.

All of these factors should help point you in a certain direction in terms of what goals, disciplines or niches you are most suited to pursue and excel in.




Interests

Your interests are a far simpler attribute to reflect on and determine.

Interests are things you are drawn to naturally like a magnet.

Whatever you are naturally drawn to and interested in will require less motivation to work hard at pursuing.

For example, when I first began trading I was initially introduced to stock trading and trend-following.

Having zero knowledge about what trading was or even that there were other styles of trading, I pursued this methodology for a number of months before I discovered the existence of forex trading.

I continued learning how to trade stocks for another month or two before eventually I realized I was far more interested in currencies. Everything about them was more appealing to me in terms of curiosity – the international and global elements, the political and fundamental elements, the social and economic elements, the fact that the markets were moving 24 hours per day.

Once I moved over to forex trading, I realized that trend-following was far more difficult in a choppy market, and began researching structure-based swing trading.

It wasn’t long before I’d fully committed to being a price-action based forex trader, and I’ve never looked back.

I still trade stocks and crypto actively, but I would certainly say I specialize in trading the forex market – because that’s what naturally interests me the most (at least for now).

Now that I’ve found my chosen market, the past few years have been spent attempting to marry my strengths and mitigate my weaknesses in terms of developing trading strategies and methods that suit my personality traits.

Which, by the way, is a never-ending process. There are always improvements that can be made, and the nuances of our personalities can change or be discovered as we learn and develop.

Which is why it’s so important to find a market and a trading style you are naturally drawn to so that a lack of motivation doesn’t creep in to hinder your performance and progress.




Values

Values dictate the intensity you bring to your chosen field.

If what you are trying to achieve (and how you go about achieving it) also happens to fulfill your values, then you will do almost anything to pursue success.

These are the things which, in the context of your career, are the most important to you.

This is a question you need to reflect on.

Whatever answers you come up with will dictate where you work.

Your strengths will dictate the role you pursue, your interests will dictate the domain or asset class you choose to specialize in, and your values will dictate where and how you decide to work.

For example, perhaps your values align with a certain company or trading firm or a small start-up.

Or perhaps your values are aligned and better suited to working alone as an independent trader.

For me personally, I much prefer to work alone than to work in a group (which has been true forever – ask anyone I went to school or university with), which is why I’ve never actively pursued employment at a prop firm with other traders, or even investors or partners for that matter.

This is because I value independence, I value freedom, I value personal responsibility, and I value being able to work under my own terms in my own time and in my own private space without any limitations or rules or distractions.

I don’t value being rich more than being free, and so just because I could be making more money working for Goldman Sachs or some other large institution doesn’t mean I’m remotely interested in sacrificing my independence to join a collective – regardless of the potential financial rewards.

I also value living close to my friends and family here in Australia, so the idea of moving overseas or even interstate doesn’t interest me either.

And finally – I value charity, creativity, honesty, contribution and giving back to the world in any way I can. Which is why I started this blog and my YouTube channel as an outlet for those values in my work as a trader.

Just because I like working alone doesn’t mean I like being isolated, and so having a community of like-minded traders to bounce ideas and stories and encouragement off is important to me – and so I take time out of my day each and every day to maintain that connection.

These are the types of things you must reflect on yourself in order to create an optimal work-life-career balance – not just for your health and happiness, but also for your performance.

It’s not that people who fail at trading lack resilience, confidence, or motivation – it’s that a lot of people are just pursuing goals that don’t ignite the passion to excel within them.

All three of these elements which are unique to you – strengths, interests, values – operate in a synergistic manner to enable you to perform better than others, more intensely than others, for longer than others.

It’s extremely important to optimize them in relation to your chosen style of trading if you want to excel.

As James eloquently puts it:

“This requires shifting from the bullshit ‘you can be anything you want to be’ to the more accurate ‘you can be a hell of a lot more of who you already are’.”




#2: Skill Acquisition / Technical Preparation

The ‘sweet spot’ is best thought of as your hardware, whereas the second phase of attaining elite performance focuses more on your software.

Once you’ve identified where you are naturally geared to perform best, the next step is to develop the necessary skills and knowledge to enable you to practically apply your talents in an optimal manner.

It’s not enough to simply know that you would make a great crypto trader using technical analysis – once you’ve identified that, the next step is to develop a methodology or trading strategy with edge, work on your self-discipline and emotional control, and put in place processes to mitigate risk and scale your operation over time.

However, this phase is not as simple as it might seem on the surface.




The 10,000 Hour Myth

There is a common nomenclature in the field of human performance which states that it takes 10,000 hours to become proficient at any given skill.

Even I believed this to be true until I heard this podcast, and had no idea where the number had come from or had even stopped to question it. It seemed to me to make sense that if you spent 10,000 hours doing something you would naturally become pretty good at it.

Well, that might be true, but it’s not necessarily true that spending 10,000 hours practicing something is enough to become an expert at it.

James points out that the journalists who wrote the books that popularized this misconception over-simplified the data, and in fact the 10,000 hours thing is nonsense.

During a research study of around a dozen elite performers, it was found that some people achieved expert status in a certain skill after around 10,000 hours of practice, and some took even longer, but one of them actually achieved expert status in much less than that at around 2,700 hours.

The question is – what did the person who achieved expert status in 2,700 hours do differently to the rest who took 10,000 or more?

As James says about the matter:

“If it takes you 10,000 hours to excel, then you’ve got a really shit methodology. You’re definitely not performing in your sweet spot.”

It’s not the time spent training that matters.

It’s the quality of the time spent training.




Start With Comprehensive Foundations

To be successful you don’t need to do extraordinary things; you need to do ordinary things extraordinarily well.

The message here is do not skimp on your trading education.

There is nothing to be gained from rushing through the foundations. Take your time to master them, to fully understand and integrate them into your processes.

I hear from traders far too frequently who are blowing money left and right, digging all kinds of holes for themselves and in some cases even becoming severely depressed – and all because they have no strategy with a proven edge.

They haven’t taken the time to learn and master the basics before they started swinging for the fences.

It’s a waste of energy, a waste of money, and most importantly – a waste of time.

Spend the time to truly master the foundations, and you are already half way to excelling.




Practice Over Theory

Once you have the first dimension mastered, it’s time to move on to the second phase which is putting the theory into practice.

It’s what you do, not what you know that sets you apart.

Knowing a lot about a trading strategy doesn’t mean you can execute it flawlessly.

Once you’ve mastered the basics of trading and you’ve got a methodology that you’ve tested and found to be profitable that you trust yourself to trade, that is not the end of your learning process but merely the beginning.

Now you need to learn how to execute and manage your trades through your trading platform without making errors (seems obvious, but you’d be surprised how often traders lose money from clicking the wrong button).

You need to learn how to control your emotions under pressure and during losing streaks.

You need to learn and analyze how your strategy performs on real-time data.

For example – perhaps you have a strategy that works perfectly in theory on the five minute timeframe and you’ve backtested it and found it to be profitable historically, but when you go to trade it with a real account you are crippled by high spreads and can’t get good fills on your orders.

Or perhaps you find a crypto trading strategy that works great on a demo account, but when you go to trade it you find that there’s not enough active liquidity to get in and out of positions quickly. This actually happened to me recently and I was forced back to the drawing board on a pennystock style strategy I was working on.

The theory is important, but so is the practical. If a strategy works in theory but not in practice, it’s a dud strategy.

Think, do and produce.

Think the theory through, act on the theory as soon as possible, and see if it produces good results – then repeat until you find something that actually works.




It’s On You

Don’t expect to just be given the solutions.

You need to go out there and find them.

Your life and your future is your responsibility, and you need to seize your success. You can’t just sit around hoping for it to happen. You must take the lead.

A mentor or a coach can explain the theory or a method to you, but they can’t understand it for you.

It’s up to you to put in the hard work and invest the time to integrate that information, to understand it, and to implement it.

“Ultimately, advanced skills can’t be taught, they must be discovered by you,” James says.

When it comes to any realm of elite performance but especially trading, one of the most pivotal prerequisites for success is taking complete responsibility for your own results – the good, the bad and the ugly.

For so long as you blame others for your failures, or you depend on others for your successes, you are never going to achieve great things.




We Need Challenge to Change

Elite performers constantly challenge and push themselves to do better.

The difference between your current abilities and where you want to be in terms of performance is called a ‘performance gap’, and it’s exposure to this gap that stimulates growth and improvement.

This is called the ‘adaptive zone’.

You need to spend as much time as you can pushing yourself to the edge of your ability in order to grow. That’s the spark that is going to activate your genetic potential to expand your own capacity.

There is a difference between pushing yourself and expecting the impossible, so it’s a delicate balance between doing things that test your abilities to the limit and pushing yourself to the point of panic or overwhelming stress.

If you find yourself in that place then you need to pull back a bit, but if you’re too comfortable and you’re not in the zone of high-pressure then you’re not going to improve beyond your current capacity.




Deliberate Practice

Unless your training reflects the specific skills that you require during live performance, it isn’t going to help you no matter how much time or effort you invest into it.

You must identify the problem areas in your strategy or your performance on a regular basis and work on those areas diligently and with keen focus.

An example of this for traders might be spending too much time trying to catch the tops and bottoms of markets when really, if they’d just spend that time working on eliminating low-quality setups and maximizing their profit potential on their winning trades, they could be performing on a much higher level.

Ask yourself what is it specifically that is making you the most profit on your best trades and identify obstacles to maximizing those opportunities and develop a plan to overcome them.

The way I do this, and it especially helped in the beginning of my trading career, is that I write down one major issue I’m having with my trading and focus all of my attention on fixing or eliminating that issue.

Then once I’ve developed new habits and overcome that obstacle, I move on to the next one, and repeat.

This helps prevent you from being overwhelmed with too many issues to address, and you’ll be surprised at how quickly you overcome each obstacle when you focus on them intently one at a time.

It also helps with motivation as you have a record of all the problems you’ve encountered and conquered which you can reflect on during times of discouragement and when you feel like you’re not making progress.




Create Uncertainty

As traders we are constantly confronted with uncertainty.

This is a double-edged sword – we are always uncertain about how much profit we’ll make, and we are always uncertain about how much damage we could take if things go horribly wrong.

It’s hard to learn from unexpected calamities and catastrophes without suffering significant losses in trading.

One way to mitigate this issue is to expect the unexpected and train yourself to recognize and think clearly when it happens.

It’s easier said than done, but there are methods for achieving this during your early days as a trader.

Until you experience a seriously unexpected market event like a flash crash or a recession or a short squeeze (that sends Gamestop from $20 to $480 in a matter of days) it’s hard to know what experiencing that sort of event will be like.

But by studying those events, you can better understand how to recognize them as they’re happening, and to develop game plans for if and when they happen.

One element of that is risk mitigation and avoiding catastrophe or blowing up an account when the unexpected occurs – which comes down to a number of things like position sizing, correlated risk, early warning signs and filters etc.

But another equally important element is how you might profit from these unexpected events.

On the 3rd of January 2019 there was a flash crash in the forex markets which sent some currency pairs like AUD/JPY plummeting in price over 500 pips (5 times the 14-period daily ATR) in a matter of minutes.

I was lucky enough to not be involved in a trade at the time since I usually take the week off around New Years.

Much of this was luck because theoretically this could have happened at any time of year, but the chances of a flash crash occurring in the forex markets around holiday periods when the major players in the markets are not participating in the markets are exponentially higher than at other times of year.

So I wasn’t just taking the time off to take a break, although that was part of my motivation for doing so – I was also taking it off because I knew that the markets can get a bit weird during low-volume holiday periods and I didn’t want to be caught out in any chop or unpredictably volatile moves.

The fact that I was sidelined during this period of time meant that I could take advantage of the unexplained flash-crash and trade the inevitable recovery, which led to one of the best starts to any trading year I’ve ever had.

This was made possible due to the fact that I had studied all of the major flash-crashes which had occurred in the forex markets historically, I did what I could to stay out of the market conditions that typically cause them, and I was able to recognize what was happening as it was happening and had the confidence to take advantage of the opportunity I saw despite the apparent chaos and uncertainty.




Variability

“Learning is not mindlessly repeating solutions. It’s the mindful search for solutions repeated over and again,” James says.

This is particularly true for trading.

Just because something works now does not mean it will continue to work in the future.

Most trading strategies that have genuine edge over the markets might continue to work for several months or even years, but there is always the threat of markets changing as the world changes.

You can’t get stuck on any single solution to any problem or puzzle you encounter.

It’s important to remain adaptable and flexible as a trader – not just to attain elite performance, but for long-term survival in general.

Those who get stuck stagnate and die, those who are flexible adapt and survive.

And furthermore – just because you found an edge over the markets doesn’t mean it can’t be improved or expanded upon.

Never be complacent as a trader. You can always do better, or in the very least, do more of what works.




Choose Your Focus Carefully

In tennis, approximately over 80% of points are won through the first serve, the return serve, and the second serve.

This is where elite tennis players should focus the majority of their attention.

There’s no point practicing tennis for 10 hours per day (or 10,000 hours for that matter) if you’re not investing a significant portion of your practice time into addressing those key parts of your game.

Hitting the ball back and forth is all well and good – but you need to hone your reaction time to those initial key moments, or else you are putting yourself at a serious disadvantage to any other players who are focusing their efforts on those key areas.

Interestingly, this falls very much in line with the natural laws of the Pareto Principle or 80/20 rule – where 80% of our results come from approximately 20% of our efforts.

This principle applies to tennis, football, business, investing and trading.

No matter what style of trading or investing you pursue, there will always be a small subset of areas in your process (setups, entries, exits, position sizing etc) which will disproportionately affect your results.

It’s important that you hone your practice, development, analysis and improvements on those key areas rather than waste too much time focusing on aspects of your trading which don’t move the needle as significantly in the direction of success.

Many traders spend their entire lives seeking a better strategy and hopping from one new approach to another without taking the time to identify what’s working about what they’re already doing, and doubling down on improving and optimizing those key areas – which in many cases can make all the difference between a wildly successful strategy and a mediocre or failing strategy.

“It’s very, very rare that a trader’s success is built on one or two extraordinary things. Most people that excel at the top that I’ve met or worked with are the people who master the basics and don’t make big errors. It’s the errors that kill you.”

James King

This extremely astute and wise observation applies not only to trading, but to every competitive activity under the sun.

Any fan of any sport knows that there’s someone at the top of that sport who performs better than anyone else not just due to raw talent, but due to consistency – they rarely if ever make mistakes, and they are always ready to capitalize on opportunities when they present themselves.

*Cough* Lewis Hamilton *cough*.




#3: Ability to Access Technical Ability When It Counts

Now it’s time to deliver on your sweet-spot and technical skill acquisition – on demand, and under pressure.

You can’t anticipate what the market will do next, but you need to be ready for anything.

As James points out – it could take 10 years to get to your level of skill in trading, but the execution of that skill to exploit an opportunity could come down to 10 seconds of focused action.

One thing that outliers do is that they are able to focus, regulate emotion and perform on demand no matter what kinds of pressure or distractions might be around them.

Perhaps the most key difference between an elite performer and anyone else is their ability to control their emotions. It’s not skill that differentiates the top guys from the rest, it’s being able to execute and perform regardless of the conditions that makes them stand out.

Your thoughts + your actions = your emotional state.

So if you can manipulate your thoughts and the actions you take, you can dictate the emotions you experience.

This is also referred to as a “flow state”, or “trading in the zone” if you will.

Many of the greatest trading psychologists of all time constantly refer to the importance of this mental state when it comes to elite trading performance. It’s not something that can be bought through a course or system, or inherited from a mentor.

It’s something that comes naturally after thousands of hours of deliberate practice and intention, facilitated by confidence in what you are doing, and trust in yourself.

This can only be achieved through complete emotional control and self-discipline combined with complete faith in your strategy or system.

You must trust yourself, and you must trust your methodology.

The self-belief comes from working through and overcoming limiting beliefs and limitations in skill or knowledge, whereas the trust in methodology comes through experience, practice and in many cases – simple testing.

If you backtest your trading system thoroughly, and you work hard on developing good mental habits (like meditation, mindfulness, self-reflection and self-analysis, and other cognitive behavioral therapy techniques), then you will naturally develop a tendency to enter your flow state as you become more confident and experienced at succeeding in what you do.

As James says:

“That’s what elite performance is all about, trying to get into that state. The message here is that emotional control is a skill, and like any skill you must invest in methodology, time and energy to develop and maintain it.”

If you find that you’re trading from a place that is not conducive to these cognitive strengths then it’s best to step away for at least a few minutes to recenter yourself, if not a few days or even weeks depending on what is negatively influencing your ability to maintain complete focus and emotional control.

Most elite performers don’t have this luxury – but as traders who can usually pick and choose when and where we work, it’s a luxury we should take advantage of whenever we can.

It’s always best to take no trades than to trade badly.

Once you identify where you perform at your best, it’s important to try to create a routine which encourages whatever conditions lead to that optimal performance. This also makes it easier to identify when you’re in a ‘sub-optimal’ state.

If you notice that your thoughts, feelings or even body language and breathing are not in alignment with your best-performing self, you can begin the process of taking a step back and re-grouping.

There are several simple techniques for re-centering yourself and disrupting your current sub-optimal state of mind. James provides a few examples:

  • A distraction countdown of 3-2-1
  • Slam the table
  • A state change (stand up, change posture – shoulders back, chin up, eyes up etc)
  • Take a few deep breaths
  • Go for a walk
  • Any deliberate or vague action that works for you

…and then go back to the problem.

Interestingly, some of these techniques are common approaches used by many Zen Buddhist schools and monasteries to encourage students to be more present or mindful if their attention wanes during meditation or contemplation.

This is also what outlier performers do.

And if you’re still struggling to get back into your groove, there are a few practical steps you can take within your trading as well, such as:

  • Break the problem down into its components
  • Reduce your size
  • Reduce your position quantity
  • Give yourself more time to make decisions
  • Change your expectations



#4: Continuous Improvement

By now, we’re pursuing the right goals.

We’ve identified our strengths and weaknesses and we’ve decided upon a trading style, asset class and methodology that plays to those strengths and mitigates those weaknesses.

We’ve developed our technical abilities so that we’re prepared to deliver in a practical sense.

We’re psychologically prepared to access our technical ability and play to our strengths and avoid succumbing to our weaknesses or making any major mistakes – on demand, under pressure and when it counts.

If we do these three things correctly then we are guaranteed to be experiencing some level of success.

Now that we’re finally achieving success after putting in all of this work, it’s important to make sure we sustain that success.

We all have inherent self-destructive biases.

Many, many traders experience this (and athletes too) where once they begin to achieve some level of success, they somehow find a way to drop the ball and regress back to their previous status quo and fail to break through the ceiling of their previous capacity.

James refers to this as “post-summit peril”. He points out that the vast majority of deaths of climbers of Mount Everest occur on the way down, not on the way up.

The analogous danger here is that by the time we’ve overcome our previous heights of success we’re exhausted, the temptation is there to become complacent or overconfident (or fearful), and the risk is we switch off mentally or we lose focus.

We start to take short-cuts, cut corners, rush things, and as a consequence we slip and regress back into our old ways.

For beginner traders (and in my own early trading experiences) this can manifest itself as finally finding a strategy that works, trading it for a few days or weeks or even months, and then one day we let our old habits creep back in.

We take a few too many trades we’re not supposed to be in or we over-size our positions – and boom, suddenly we’re back to square one with a blown account and wondering what the hell just happened.

This happened to me two or three times before I broke the cycle. Most of this is caused by self-limiting beliefs and a lack of belief that we deserve to be more successful than we currently are, or in the very least, a lack of sustained confidence in our abilities.

It’s important to maintain a positive mental attitude, reflect regularly and deliberately on your progress as a trader, come to believe that you deserve to be successful and that you have earned your success – and then put in place systems, routines and habits to sustain that success.

You need to experience success long enough to become comfortable with it, and integrate it into your personality. You no longer think “I want to be a profitable trader” but believe “I am a profitable trader”.

Once you’ve achieved this plateau of performance – that is when the continuous improvement principle comes into play.

The two biases in particular that we need to be mindful of along the way to achieving this initial milestone of success are:




Continuity Bias

James describes how continuity bias affects our decisions:

“This causes us to assume that the future will resemble the present, and the effect of this is that we downplay the real risk we face – what threats exist, when they might strike, and how significant they can be.”

This is the most common bias that affects traders.

We think that either the market conditions will continue to be as conducive to our strategy as it has been, or that our strategy will continue to perform as it has been, and we become naïve to the risks we face when the conditions inevitably change.

The list of traders who were caught with their pants down whenever the inevitable “unexpected” occurred is infinite and ever-growing.

Don’t be one of them.




Illusion of Personal Control Bias

“We downplay the role of randomness in our success, and we end up thinking that we’ve achieved success and it’s all down to our pure genius.”

The problem with this bias is that it leads us to develop a false sense of confidence and security.

I’ve personally seen this rear its head the most in the crypto markets.

Whenever the crypto markets enter a prolonged bull phase, every man and his neighbor thinks he’s a genius.

Even I fell victim to this back in 2017. I put a few thousand into a dozen or so crypto projects and within months I was sitting on over fifty grand. A few weeks later, I was too busy patting myself on the back and bragging to friends to notice the crash that was occurring right before my eyes.

Lucky for me, I was so dejected by the experience that I didn’t bother to sell my crypto positions and I held onto them until today and my portfolio is now worth over $150k – so I guess it worked out in the end, but now that I know what I’m doing I won’t make that mistake again!

I also know that I wasn’t the first to make that mistake, and I won’t be the last.

Just a few weeks ago a bartender in his early 20s saw me checking my forex trades on my phone while waiting for a drink and told me he was planning to quit his job and become a full-time crypto trader, and when I asked how long he’d been trading, he said a few months.

I wished him good luck and made sure to leave a good tip.

A bull market does not go on forever, and the bear market that shakes out all of the hopefuls likewise does not last forever.

And so we have an eternal seesaw of naïve but ambitious traders entering the markets when things are going well and then exiting the markets discouraged and convinced the whole thing is a scam when things turn sour.

All the while it was their own lack of preparedness and acceptance of personal responsibility in their long-term results and success that led to their failure. Meanwhile, seasoned professional traders are quietly and anonymously doing their thing in the background and profiting year on year.

The biggest problem with these biases is that they’re silent and invisible while we’re doing well. We don’t tend to notice them until after the catastrophe that they inevitably cause.

I think this explains the cycle that most traders go through.

It’s rare to meet a successful trader who didn’t blow an account or two (or five) in the process of learning to overcome these hidden dangers.




Mindset

The way to overcome these biases is simple.

“While we must always strive to be number one, we must never let ourselves get there.”

By this James means to always stay humble.

Even when you’re at the top of your game, there’s always that theoretical adversary, that next calamity, that next mistake that can rapidly bring you back down the ranks if you lose your focus.

Complacency is the winner’s kryptonite.

Someone who gets too accustomed to success can very, very quickly find themselves getting accustomed to being back at the bottom.

There are uncountable stories of traders (investors, entrepreneurs, athletes, you name it) who had it all and then lost it all because they lost sight of their rear-view mirrors.

James points out how the British rowing team overcomes this challenge, by employing the mantra “make the boat go faster”.

This is an infinitely unattainably ambitious goal that keeps them working hard no matter how successful they become.

The mantra isn’t “be the fastest boat”. If they drew the line there, it’s likely that they’d pretty soon fall behind the next fastest boat.

The mantra is make the boat go faster, which is something that can be done regardless of how dominant they become as a team (or how threatened they become from other teams).

When we’re in second-place we have that hunger, that drive, that adversity – and it stimulates the drive we need to progress.

This is a great way to think about our trading.

Our mantra should be something akin to this. We shouldn’t strive to beat arbitrary goals, but rather strive to constantly and continuously improve our trading.

Obviously goals help benchmark our progress, but there is no finish line.

There is no key performance indicator we can hit that will indicate our triumph as traders.

There is always room for improvement in some area, at some time, all of the time.




Don’t Jump to Solutions

This is a huge one for traders.

We all have this innate desire or belief or thought that somewhere out there, in the next advert we see, or the next blog post we read, or the next YouTube video we watch, there’s a silver-bullet solution to all of our problems.

An easy way out, a quick solution.

Instead, we should develop a comprehensive understanding of what it takes to win, and then constantly evaluate where we are in relation to that.

Then before we start engaging in techniques and development interventions or prescriptions we can be maximally responsive to change and pick the right thing to focus on.

We need to develop a strong internal compass in relation to our development.

We need to firmly understand what it takes to win, what it takes to sustain success, what it takes to maintain good results, and what it takes to avoid failure and catastrophe.

The rule then becomes “if what we need to do to innovate and stay ahead of the rest isn’t obvious, then we don’t understand the problem well enough.”

And it’s way better to say “I don’t know” and spend time better understanding the problem than it is to jump to solutions (or conclusions).

Solutions should be obvious once we properly understand the problem and our position in relation to it.




Set Targets

The end of the improvement cycle isn’t achievement.

It’s setting the next goal.

Once we’ve broken through the ceiling of our previous obstacles and limitations, there is little time to celebrate.

Obviously we should take time to reflect on our progress and feel good about improving, but just because we overcame a problem or obstacle doesn’t mean we’ve “made it”.

There is always a new performance target to conquer.

The best athletic teams and sports teams on the planet don’t just draw the line at where they stand in relation to other peers – they even look outside their sports to see how their win rates and statistics compare to completely unrelated competitive arenas.

This kind of thinking may come naturally to you as it does to me, but some people don’t think this way, and they ought to.

For example, when I see someone performing exceptionally well at a given sport or mental challenge like chess, poker, Formula One, golf or even computer games, I am constantly wondering what it is that sets them apart from their competitors and what I can learn from them to implement into my own processes as a trader.

I’m always thirsty for knowledge.

And while I won’t for a second presume to consider myself even close to an “elite performer” as a trader, I know that this mindset has resulted in huge leaps of understanding as I’ve observed others who are great at what they do and reflected on what helped them to be the best at what they do – regardless of what discipline they excel at.

As James says:

“We need to swap out that ‘if it ain’t broke don’t fix it’ for ‘if it ain’t broke here with a sledgehammer, set a goal that stretches us, that will uncover obstacles, establishing that performance gap and moving us into the adaptive zone.”




Experimentation

Once we’ve set a target, we need to experiment our way to success.

The optimal solution to any problem or the path to any target is rarely obvious.

We can set our vision with certainty, we can determine our problem with certainty, we can set our target with certainty, but when it comes to experimenting our way to a solution, we’re suddenly working in the realm of uncertainty.

This means we need to make a plan and then start experimenting and take action according to that plan, and then the learning or innovation process begins.

The action we take provides us with a reaction, and that means we can start analyzing results.

This stage will mean failing – a lot – but that failure should guide us towards a solution. Failure during experimentation is not good or bad, it’s just data that helps guide the innovation.

If the experiment is successful then that’s great, celebrate the moment, but remember that the end of the improvement cycle is not success, but rather a transition period to the next improvement plan.




Conclusion

That’s a lot of information to take in.

And if I’m being honest, had I known how much I would need to write to capture all of the important elements of this CWT podcast interview, I probably would have picked a different subject to cover for this particular blog post.

But I don’t regret breaking down this podcast for a moment, because this information is incredibly important to reflect upon.

If we can integrate and implement all of these many but simple steps into our development process as traders – in regards to our psychology, our learning process, and our strategy development and optimization process – then we dramatically improve the chances that we will perform at a level far beyond the average trader.

There is always room for improvement, we know that.

But what’s not obvious is where or how to improve.

This framework provides a methodology to apply in order to systematically increase the chances of optimal improvement in pursuit of elite performance.

As James says to wrap up his discussion with Aaron:

“There’s no single point where learning ends and we’re left with just excellence. It’s a fluid, continual process with no finish line. We just need to keep at it. The more you align with the principles discussed here, the higher your probability is going to be of success over time.”

This is all just the tip of the iceberg.

To learn more about James King’s approach to dissecting and analyzing exactly what drives elite performance in traders and other professions, check out his book “Accelerating Excellence”:


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