Assessing trading skill as a strategic skill

The new book Winning the Long Game: How Strategic Leaders Shape the Future provides six elements of what makes a good strategic leader. It was written by one of the leaders in decision theory, Paul Shoemaker who I have followed for years. When I read the elements of strategic leadership, it felt as though I was also reading about the key skills of what would be a good trader.

The authors focus on six key skills which make an effective strategic leader. The actually provide a test of whether you have these six elements. I think a similar test could be developed for traders.  If you can determine whether a trader has these skills you have gone a long way at conducting an effective due diligence. I have taken each of the six elements and matched them to the type of questions you would ask  a trader to understand how he thinks. Of course, the questions could be more detailed but the six elements seem to hit all of the key spots.

The good trader has to anticipate change. Thinking through change can come in a number of forms, but asset markets are expectation markets which mean you have to think about the future value not the past performance. The good trader challenges his thinking and will not accept what would be called conventional thinking. If everyone is thinking the same, someone is not thinking. The effective trader is good at interpreting the information that is placed in front of him. He can turn facts into information that can be used to enhance knowledge. Nevertheless, analysis is not enough. A good trader has to decide and have a process on how to act. The trader also needs to align his interests with those of the client through his portfolio structure. Finally, there has to be some form of learning or feedback which will allow for new thinking.

Anyone who can get these six elements right will be a good trader or have a fighting chance for successful asset management. Everyone does not have do this the same way; however, discipline and structure through using these elements provide for better decision-making.