10 Characteristics of Successful Traders
If you ever plan on becoming a professional trader, there are ten characteristics you must possess. Without them, your career as a trader may be short-lived. Consider acquiring or mastering these successful traits before risking huge sums of money in the financial markets.
If you haven’t mastered discipline, you’re not ready for a career as a trader. Discipline is a broad umbrella term that refers to everything from mastering your trading psychology – things like fear and greed – all the way to avoiding impulse trades based on intuition and speculation.
- Realistic expectations
As a trader, you should endeavor to win as many times as you can. But there’s a huge difference between putting your best foot forward on the basis of sound analysis and expecting you’re going to win each and every time. Traders who think that every trade is a “sure thing” usually are the first to margin out.
- Lifelong learning
Successful traders are lifelong students of the game. They are constantly reading about the markets and adjusting their strategies accordingly. In the world of finance, you must be agile if you plan on sticking around for a long time.
- Think for yourself
There’s a disease on Wall Street. It’s called herd mentality. This is the same mentality that has fueled asset bubbles and speculative investments that end up wreaking havoc on the financial system. While it’s important to consider market sentiment, each and every decision you make should be your own.
- Good with numbers
We’re not talking about advanced calculus or linear algebra. We simply mean getting good with the quantitative variables of the market. You should be able to quickly measure bid-ask spreads and pips and draw fast conclusions by looking at things like the PEG and P/E ratios in stock trading. Getting a handle on your math skills will make your trading career much easier.
- Know thyself – and trade accordingly
Throughout the course of your career many self-proclaimed gurus will try to sell you on the holy grail of trading. In reality, no such thing exists. There’s a huge variety of trading strategies, methods and tools you can use to succeed. Which tools you use, which sessions you trade and how aggressive/conservative you are should mirror your personality and what you hope to achieve. Know yourself to develop a trading strategy that works for you.
- Risk manager
We waited until number 7 to introduce you to one of the cornerstones of financial trading. Financial risk management – the use of financial tools and strategies to minimize or manage exposure to risk – is usually the difference between success and failure. Things like diversification, risk/reward ratio, risk per trade and minimizing leverage can help you manage unnecessary exposure to risk in the financial markets.
- Develop a winning routine
Humans are creatures of habit. This applies to both our professional and personal lives. Successful traders usually have a routine they swear by. Whether it’s rising early, setting up their daily charts or glancing at the economic calendar, they act with purpose. If you’re not purposeful, you won’t be successful.
- Trade multiple markets
Successful traders rarely stick to just one market or asset class. Slowly but surely, they become experts in a variety of markets, including stocks, bonds, commodities, indices, forex and others. Your ability to master multiple markets and asset classes will also help you diversify your portfolio.
- Do whatever it takes
Number 10 applies to most successful people in life. The difference between success and failure usually boils down to how many times you can get up after being knocked down. If you want to succeed in the incredibly competitive and often daunting financial market, endeavor to do everything in your power to win. Constantly remind yourself why you are trading and don’t let negative experiences kill your passion. After all, it’s passion that drives success.