Shared and Common Characteristics
Sharp trading skills and a clearly-defined approach to trading can be compromised for long term trading success. But all the books, websites, and mentors in the world can’t overcome a bad attitude and mental roadblocks that undermine trading performance. This is why successful traders share common psychological characteristics.
Let’s look at some of the emotional characteristics that guide the decision making of successful traders. These positive characteristics are certainly an incomplete list but offer a great list of characteristics worth immolating.
An Affirming and Positive Attitude
Successful traders live in a healthy dose of optimism, even when it isn’t supported by the latest profit and loss statement because they know that drawdowns are temporary and they have the skills needed to build back profits. They just wake up in the morning on the right side of the bed, no matter what side they got out of. They visualize themselves as winners on every trade.
It takes confidence in your abilities, confidence in your decisions, confidence in your charts and confidence in your system to succeed as a trader. Successful traders are solution focused. Every problem presented gives an opportunity to find a solution. Successful traders may feel the weight of a situation but never the stress of the situation.
They Know They Are Worth It
Our culture focuses on self-esteem and self-worth from the moment we are born, but depending on our background, something triggers over time as we approach adulthood. As we transition into adulthood, we begin to move into cynicism, self-doubt and negativity.
Each of these attributes has an impact on the profitability of non-success as a trader, because they cannot see themselves as becoming a successful trader. They just don’t believe they are worth it, which is undermined when we believe we aren’t good enough to be financially successful.
Modern society is jacked up with negative attitudes about wealth that traders must overcome in order to produce consistent profits. It’s becomes a lesson of haves and have-nots, and if you aren’t Keeping Up With the Kardashians then your not worth it.
Successful traders address issues of scarcity and doubt early in their careers, understanding that it will be impossible to turn consistent profits if they don’t feel worthy of financial gain.
Over time, they understand that self-confidence comes in small steps, by making the right decisions, one at a time. In turn, they relentlessly examine each trading day, not to criticize but to learn and grow. Through this process they confirm that confidence and believing they are worth it pays off!
They Develop Patience
Oh you thought you were born with patience and you didn’t get that gene at birth, right?
Wrong! Patience is something that successful traders have developed over time, patience is sometimes the same as discipline.
Having Mental Toughness
The market will constantly throw losing trades at you, and you need to bounce back. If you feel discouraged every time you lose a trade, or your strategy fails to produce the result you expect, your life will be miserable. Losing trades are constant are an acceptable quotient with trading.
The difference between a successful trader and an unsuccessful one is that most successful traders win slightly more on their winners than they lose on their losers and typically win slightly more often than they lose. If your wins are much bigger than your losses, you may only need to win 40% or 50% of your trades. Other traders may win 70% or 80% of their trades, but their wins may be equivalent to, or only slightly larger than, their losses. In either case, losing trades happen.
Traders must stay focused and rational through a losing streak and not let the loss of capital affect their judgment—which will make matters worse. It requires mental toughness (AKA Patience) to stay focused on executing your trading plan and realize when the market isn’t providing you with good opportunities for your strategy.
A trader must withstand a continual barrage of punches from the market. Losses are a fact of trading, but it’s how we act after some tough trades that make all the difference. After taking losses, move on, and continue following your trading plan. If you are following your plan, but you just keep losing, market conditions likely aren’t right for your strategy. In that case, they walk away until they are. Sometimes being mentally tough means making the hard choice of not trading.
They Understand The Need for Independance
Initially, you’ll likely get some help with your trading, whether it’s from reading articles or books, watching trading videos such as these, or receiving one-on-one mentoring. Ultimately, though, it’s you who will place your trades and determine your success.
Eventually, traders must develop a sense of independence, no longer relying on others. Most traders choose this path because they find it to be the most profitable. Once you have a trading method that works for you, you don’t want other people’s opinions. You do what works for you, and that is that.
Other traders must learn independence the hard way. They bounce from mentor to mentor, or trading book to trading book, always feeling like they are missing something. Ultimately they have learned very little. Now they have no idea how to trade because they relied too heavily on someone else. If you develop independence, taking responsibility early on for your education, profits, and losses, you won’t have these problems down the road.
Get help whenever you need it. Independence is just developing a trading style that works for you, whether someone else helps you or not. Independence is about working to build a personal toolbox, so you can remedy your trading, instead of relying on others.
If you are just beginning your trading journey, start developing your independence now. Take the information others offer, analyze it for yourself, make it your own, and master it. That way, you don’t need to rely on them in the future.
They Are Forward Thinking Traders
Like a chess master, traders are always planning their next moves, calculating what they will do based on what their opponent (the market) does.
Traders are constantly planning their next action, based on new price information they receive. They consider different scenarios that could play out and then plan out how they will implement their trading plan (entries, stop loss, targets, trade management, position size) under each of those various conditions.
As a trade approaches, consider what could happen while you are in the trade (doesn’t move, moves a lot or little, moves quickly for or against you, moves slowly for or against you), and how that will affect your psychology and trade.
Go through what you will do in each scenario so that you can quickly navigate the changing market conditions. This is what we call forward-thinking, and with practice, it can become almost instantaneous.
Forward-thinking knows what you will do, no matter what happens. It allows you to act decisively, without hesitation. Have a defined set of protocols to use in rare but inevitable events, like losing your quote feed, for example. Forward-thinking takes practice and consumes a lot of mental energy at first, but the more you practice forward-thinking, the quicker and easier it becomes.
What’s The Conclusion
Most traders aren’t born with all these traits, rather they possess a few and must work rigorously on the others.
You can learn these traits, which is a positive thing because it means successful trading is determined by you and not necessarily the genes you were born with.
Some of us are prone to certain weaknesses, but we can offset these with strengths, which can help us mitigate the damage of our weaker qualities.