Last weekend I wrote about taking an inventory of our trading skills and my belief that how we prioritize them can make a substantial difference in our trading results. The list I included was as follows:

a. knowledge of and ability to use various orders
b. technical knowledge and abilities
c. understanding and using fundamentals
d. utilizing reward to risk potential
e. finding candidates to trade
f. entry decisions and strategies
g. exit strategy
h. devotion to continuing education
i. ability to discipline one's trading
j. money management
k. having a plan in general and for each trade
l. knowledge of and ability to use various strategies

I suggested that you might want to see how you would prioritize the list ideally and how you have prioritized it in actuality in your trading. I'm guessing the exercise might have been at least somewhat useful in gaining some insight into your own trading personality.

It seems fairly clear to me that the trader whose first priorities are:

Understanding and using fundamentals
Finding candidates to trade
Entry decisions and strategies

might have vastly different results from a trader whose first priorities are:

Having a plan in general and for each trade
Ability to discipline one's trading
Exit strategy
Utilizing reward to risk potential

Doubtlessly, each of the skills in the overall list are important to at least some degree. As a trader, I am convinced that certain of those skills must be utilized and in terms of priority fall on the same critical level for me. They are as follows:

Highest Level of My Priorities
- Having a plan in general and for each trade
- The ability to discipline my trading
- Money management
- Exit strategy
- Using reward to risk potential
- Devotion to continuing education

Next Level
- Technical knowledge and ability to use as discipline
- Knowledge of and ability to use various strategies
- Knowledge of and ability to use various orders

Final Level
- Entry decisions and strategies
- Finding candidates to trade
- Understanding and using fundamentals

In my books and in my personal coaching, I discuss these skills and illustrate what I consider to be the relative importance of each. Why, for example, would I suggest it is more important to use a minimum reward to risk potential than it is to find a candidate? Why is exit strategy more important to me than my entry?

Obviously, minds may differ on the priorities given to these different skills and I can't say there is some "best" answer as to how to set these priorities. I can only say I think some line-ups are better than others. Throughout the year, I expect I'll return to at least some of the individual skills I've touched on here and attempt to develop a more detailed picture of the value and importance of various of these skills.

Good Trading!
Bill Kraft

February 13, 2010

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