Trading: Emotional Capabilities versus Intellectual Capabilities - Which is most important?

I have been fascinated by many of the recent comments under a Linked-in group discussion I originally posted back in May 2011, and which still continues to attract interest even today. The discussions question was : What is more important for success as a trader - A high level of Intellectual Intelligence, or a high level of Emotional Intelligence?

[If you are interested in reading, following or contributing to the discussion, the link is here. If you are not already a member of the 'Trader, Trading & Risk Psychology' Linked-in group you can join the group here. Non Linked-in members will first have to join Linked-in.]

I would like to thank everyone who has responded and provided many fine contributions to the discussion. I would now like to add some of my own perspectives to slightly update the original question and to include some of my own thoughts to some of the recent comments.

Regarding my original question, I believe that mastery of the emotional aspects of trading is by far the most important differentiator of success when it comes to trading. I am not intending to dumb down intellectual intelligence in any way, it does matter, but as Warren Buffett said, 'Success in investing doesn't correlate with I.Q...Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.' As a trader for 25 years, and now as a performance coach, I have had the pleasure of working with some brilliant and highly intelligent traders who themselves are and have been extraordinarily successful, however I believe for these individuals it is their strong emotional capabilities which are the key to their success. 

When it comes to the discretionary aspects of trading, the ability to manage, regulate and optimise emotional capabilities is the major advantage. I would however like to add a significant caveat: The more the type of trading involves complexity, and the less discretion is required, the more I find intellectual intelligence advantageous to achieving success. Examples include trading and managing complex products and portfolios, trading which requires high level analysis to identify value, and the creation/implementation of systematic trading approaches. Even in those situations however, I still believe that a high level of emotional capability is a significant factor to achieving success.

In the original question I used the term Emotional Intelligence (EI), I do feel with hindsight that this an over-simplified concept, and that in actual fact I believe the correct statement should perhaps have referred to ‘emotional skills and capabilities’ versus ‘intellectual skills and abilities’. In short I see emotional skills and capabilities as how one works to manage and regulate their emotions and anxieties, thus enabling them to work in conjunction with our rational cognitive abilities, so as to help them effectively direct their internal resources in a productive manner towards achieving successful outcomes. This raises many further questions, though I prefer to condense this into a few key points: 

1. What can one do to enhance their control of their emotional, and unproductive personality aspects/character?
2. How can one learn to productively use their emotional capabilities and thus project their strengths and manage their weaknesses? 
3. How can people learn to live with themselves, and thus be comfortable in their own skin? (All successful traders I meet are comfortable in their own skin).

A number of people have spoken about these aspects in the discussion, though perhaps in different ways to how I have expressed it. I believe just about anything a person can do to answer these questions and then to implement solutions into their trading, should prove beneficial. The aproaches, tools and practices people use will vary depending on their own particular needs, requirements, beliefs and individual perspective. I don't think the answers are necessarily easy to derive and execute, though for some they may be much easier for others. For example a willingness to be open to new ideas, concepts and thinking, (ironically qualities which are themselves sign of emotional maturity,) will make searching for and accepting solutions and ideas that much easier.

Some of the potential solutions discussed have included raising awareness and understanding of one's self and one's behaviours. This includes gaining a perspective on how one views the world, how one processes information and how one acts upon it, as well as recognizing unproductive behaviours and patterns both in the application of their trading, in the analysis beforehand, and the management afterwards. - To add to this I would mention that I think it is useful to increase one's own human knowledge and understanding (The group and blog are to a degree dedicated to this, as are many others). I believe it is helpful to understand who we are as a species and why we act the way we do (i.e. Human biases, cognitive distortions and limitations are part of our nature; we are not robots). Traders should also look at practical behavioral solutions: For example, improving and enhancing one's approach to risk and money-management. So much trading failure I have met stems from the emotional repercussions of poor money-management, though often the failure to implement effective money-management has its roots in a person's individual psychology. The surprising thing is that good money-management practice is so simple to effect, Chris Tubby's recent suggestion in the discussion is a very simple example of this. 

In the end I like to think of it is developing one's emotional capabilities that enables one to become effective in that crucial space between ‘stimulus’ and ‘response’. To quote Viktor Frankl: ‘Between stimulus and response there is a space. In that space is our power to choose our response. In our response lies our growth and our freedom.’

Image "Head Puzzle On Monitor Showing Human Brightness" by Stuart Miles courtesy of http://www.freedigitalphotos.net