Many investors take actions that aren’t in their best self-interest. They make
irrational trades; they trade based on emotion, rather than logic; they hold on
to a losing position due to their unwillingness to admit they made a bad trade;
they trade based on greed or panic… the list is endless.
Successful
traders, on the other hand, all have a few things in common. Developing these
characteristics and habits will help make you a successful
trader.
Successful Traders Set
Goals
Successful traders tend to be incredibly
goal-oriented. Why? Most people perform at their best when they’re reaching for
a clear goal. And there are three basic qualities that make up a clear
goal:
1)The goal must be realistic. If your goal is to
double your money every day, it sounds great – but it’s not
realistic.
2)The goal must be attainable. Just like with
a realistic goal, an attainable goal must be within your current capabilities.
The best goals are short-term goals; make your first goal a small one, and then
continue to increase your goals as you experience success. World-class sprinters
don’t start by thinking of winning the Olympics.
3)The goal must
be measurable. Goals that aren’t precise, and can’t be quantified or
measured, aren’t really goals at all. If your goal is to be wealthy, that’s
great… but what does “wealthy” mean? Our guess is that your definition of
“wealth” will change as your net worth increases. If you can’t define your goal,
and measure your progress towards it, then you have no way of assessing your
progress or of making changes to your techniques and strategies that allow you
to reach your goal.
Successful traders set goals, and
they also are confident they can reach their goals. Confidence is a key to
staying rational, logical, and disciplined. Starting with small, realistic goals
will help build your confidence in yourself and your
abilities.
Success Can Come at Any
Level
Whether you’re a beginning trader, a
trader with some experience, or someone who makes his or her living strictly
from trading, you can be successful. Many people think they have to have
significant capital, or years of experience, to trade successfully. That’s not
true. (It’s also true that if you don’t stay disciplined, focused, and rational,
you’ll end up as a losing trader, regardless of your level of "expertise.") All
successful traders started as small investors; they didn’t trade more than they
could safely risk, they learned from their mistakes, and they developed systems
that worked for them and that fit their personal styles. We have not defined
different strategies for different "levels" of traders in this e-course because
the principles are the same: logical, focused, disciplined trading creates
success.
Successful Traders SpecializeIt’s
simply not possible to understand and stay in touch with everything that occurs
in all the types of investment vehicles and markets across the world. While some
traders have developed systems that allow them to trade in multiple venues (for
instance, in different stock markets around the world), most traders specialize
in a particular type of investment, and in a particular market. You may enjoy
trading in commodities futures; that enjoyment will help you focus and stay in
touch with market events. If you aren’t interested in currency trading, for example, don’t trade in it – your lack of knowledge and
motivation will cause you to lose focus and make mistakes.
Successful
traders tend to specialize; they pick an area to gain in-depth knowledge of, and
they follow it closely, learning from past trends and patterns, and from their
own trades. If you’re a beginning trader, we recommend focusing narrowly on a
particular investment vehicle and market; learn all you can, about the market
and about yourself, before you move into other investment
types.
Successful Traders Take Losses in
Stride
No one likes to lose. But losing is a
fact of life for traders; they key is to limit your losses and maximize your
successes.
A losing trade is not a failure. It isn’t a reflection of you
or of your overall judgment. (If it was possible to be right every time, we’d
all be rich.) The only way a losing trade is truly a failure is if you aren’t
willing to take the loss, without hesitation, and move on to find winning
trades. By accepting that they’ve made a losing trade, and getting out of the
position, successful traders focus on making money – not on being right all the
time.
Many traders feel they don’t want to “lose” money on any trade, and
they stay in losing positions in the hopes that it will recover to at least the
break-even point. There are three problems with this approach:
1. The
position may never recover to the break-even point.
2. Holding on to a losing
position ties up capital that could be placed into winning trades.
3. Holding
on to a losing position is an example of unfocused trading and a lack of
discipline.
Successful traders are willing to take small losses. If you
aren’t willing to take small losses, or don’t have the discipline to take small
losses, don’t trade.
Successful Traders Stay Focused During Rapid
Swings
Most of us were raised to think that it takes years of hard work to acquire
wealth. That viewpoint doesn’t apply to trading in the markets; you can make
thousands of dollars in minutes under the right circumstances. Successful
traders understand that money can be made or lost extremely quickly, and they
stay calm and rational.
Why is that attitude important? Let’s say you’ve made several thousand
dollars over the course of an hour trading futures contracts. You’re thrilled
and excited, and you may lose your composure and start making irrational trades.
You may stay in the position longer than you should, for one of two reasons:
1)You think the market will keep going up, and you don’t want to limit
your gains.
2)The market falls, and you don’t want to give up all the gains
you’ve made, so you hold on in hopes your position will rally.
If you accept and understand that huge amounts of money can be made in a
short period of time, you are less likely to become undisciplined in your
trading. Successful traders take their gains in stride, no matter how large.
They quickly move to protect their positions by setting stops, or covering a
percentage of a short position. Successful traders stay rational and disciplined
in the face of rapid gains or losses because they understand the nature of
trading.
Successful Traders Stay
FlexibleStaying flexible requires that you
stay detached and unemotional about your trades. No matter how strongly you feel
about your analysis of a position or a trade, you have to be willing to change
that opinion and act quickly if necessary.
Successful traders realize
that bad trades reduce the gains made from past trades and potential gains from
future trades. Successful traders change their minds quickly and easily, and are
not concerned about whether they were "right" or "wrong." They’re concerned with
maximizing their gains and minimizing their losses – and to minimize losses,
they have to be willing to quickly change their minds.
Remember: the more
flexible you are, the more successful you will be.
Successful
Traders Don’t Leap Before They Look
One of the
most common mistakes inexperienced traders make is to trade when they see an
opportunity they think might be too good to miss. Jumping into a position based
on a hunch, or on the belief that you may be missing an opportunity, is no
different than gambling. Almost every investor at one time or another has felt a
rush of greed or enthusiasm for a trade – based solely on the desire not to miss
out on a great opportunity that might be available.
Successful traders
practice self-discipline, and apply skill and logic to their trading. They learn
every day, and they use what they know to make intelligent decisions on every
trade. Successful traders don’t worry about missing out – they focus on making
intelligent decisions.
Successful Traders Don’t Passively Follow
"Expert" Advice
Blindly following the
investment advice of a broker or analyst is foolish and self-destructive.
Oftentimes, the broker’s self-interest is completely different from yours,
because the broker gets paid when you make a trade, whether it’s a good trade or
not. He or she wants you to trade. Analysts may have inside knowledge or years
worth of experience, but in the end their opinions on the markets are just that
– opinions.
Successful traders take responsibility for their trades and
therefore their money. They learn, they stay focused and disciplined, and they
make their own judgments about their trades.
Successful Traders
Aren’t Affected by Mood Swings
Many traders get
excited when their positions are making money, and they increase their stake in
the position. Then, when the price goes down, they panic and sell. Emotional
traders are affected by the highs and lows of gains and losses, and fail to
stick to their plans and their strategies.
Successful traders understand
how the markets work, what to expect, and how to capitalize on trends and
events. They aren’t affected by the excitement or the disappointment that can
come from good or bad trades.
"What Takes Some Successful
Traders A Lifetime To Achieve Could Take You Just A Few Days... Or Less!"
HOME
Advertorial 1 - Introduction
Advertorial 2 - The Basics of Analysis and Rational Trading
Advertorial 3 - Basic Principles
Advertorial 4 - Characteristics of Successful Traders
Advertorial 5 - Playing to Your Strenghts, Overcoming Your Weaknesses
Advertorial 6 - Winning Psychology
Advertorial 7 - Avoiding Common Pitfalls
Advertorial 8 - Sound Money Management
Advertorial 9 - Trading Systems
Advertorial 10 - Final Words
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