We often hear that 95% of people who try trading for a living fail within the first year. These are not very good odds and it is natural for new traders to wonder if they have what it takes. In this issue, I give you a list of 20 characteristics I believe could be found in most winners. I also included some Truths about trading.
The methods employed by winning traders are extraordinarily diverse. Despite the broad spectrum of traders, certain characteristics are found in most winning traders (in no specific order):
- Winners have a trading plan with a strategy that incorporates effective money management. They have the discipline to execute their plan relatively flawlessly and the self esteem to accept the money the market gives them.
- They use their head and stay calm – they don’t get excited or depressed because of their trades. They don’t act on emotions. They can handle success and failure without self-destructing.
- They don’t trade to feel good or to get high.
- They handle trading as a serious intellectual pursuit.
- They always protect their capital because they know they cannot trade without it. This means that they don’t get caught up in the thrill of the moment, the excitement of a running stock – they don’t jump into careless trades.
- They love trading, trading is a passion and they spend a large portion of their time trading and learning about trading.
- They know that sometimes the best thing to do is to do nothing (sit on their hands). They do nothing unless there is something to do.
- They don’t pay attention to other people’s opinions, they make their own.
- They don’t try to guess the future - they know it is a game of probabilities. They understand that they will always have a percentage of losing trades but they keep the losses for those trades small. They don’t hesitate to get rid of a position when the loss is still small.
- They have a great respect for the markets and they never think taking money from it is easy.
- They behave like professionals. They take full responsibility for their actions and don’t look for something or someone to blame. Instead they use their losses as an opportunity to improve their plan.
- They trade to trade well, not for the money.
- While they are in a play, they don’t count how much money they have made or lost because they know this would influence their judgment. They focus on trading well.
- Amateurs keep thinking what trades to get into, while professionals spend just as much time figuring out their exits.
- When they have a winning position, they don’t let their emotions dictate when to close the position, which would result in small gains. They know emotions cannot be part of the decisions.
- When they enter a play, they don’t have any expectation. They understand it can go either way and that nobody can know the future.
- They have confidence in their plan, patience, and discipline.
- They are not afraid because they have developed attitudes that prevent them from getting reckless.
- They have self-monitoring skills and can continuously monitor their performance in order to improve it.
Some Truths about Trading
- The market is a huge crowd of people. Each member of the crowd tries to take money away from other members by outsmarting them. Everyone, including some of the brightest minds in the world, is against me and I am against everyone. It’s every man for himself. The money I want to make belongs to other people who have no intention of giving it to me.
- The market is like an ocean, it moves up and down regardless of what I want. The market does not know I exist and I cannot influence it. I cannot control the market any more than a sailor can control the ocean, but I can control my own behavior.
- Trading is all about management – managing myself, my money, my attitude, and my positions. It is not about predictions, forecasts or opinions.
- There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time. No man can always have adequate reasons for buying or selling stocks daily or sufficient knowledge to make his play an intelligent play (Jesse Livermore).
- Trading without imagination is like painting by numbers – and is about as rewarding(William R. Gallacher).
- The market is not going to reward anyone for observing the obvious.
- A mistake made by many traders is that they become so involved in trying to catch the minor market swings (generating lots of commissions in the process) that they miss the major price moves.
- Advisors are only wrong when you get too many of them start thinking the same thing.
- A strategy to enter and exit trades will not help you unless you are both disciplined and organized.
The methods employed by winning traders are extraordinarily diverse. Despite the broad spectrum of traders, certain characteristics are found in most winning traders (in no specific order):
- Winners have a trading plan with a strategy that incorporates effective money management. They have the discipline to execute their plan relatively flawlessly and the self esteem to accept the money the market gives them.
- They use their head and stay calm – they don’t get excited or depressed because of their trades. They don’t act on emotions. They can handle success and failure without self-destructing.
- They don’t trade to feel good or to get high.
- They handle trading as a serious intellectual pursuit.
- They always protect their capital because they know they cannot trade without it. This means that they don’t get caught up in the thrill of the moment, the excitement of a running stock – they don’t jump into careless trades.
- They love trading, trading is a passion and they spend a large portion of their time trading and learning about trading.
- They know that sometimes the best thing to do is to do nothing (sit on their hands). They do nothing unless there is something to do.
- They don’t pay attention to other people’s opinions, they make their own.
- They don’t try to guess the future - they know it is a game of probabilities. They understand that they will always have a percentage of losing trades but they keep the losses for those trades small. They don’t hesitate to get rid of a position when the loss is still small.
- They have a great respect for the markets and they never think taking money from it is easy.
- They behave like professionals. They take full responsibility for their actions and don’t look for something or someone to blame. Instead they use their losses as an opportunity to improve their plan.
- They trade to trade well, not for the money.
- While they are in a play, they don’t count how much money they have made or lost because they know this would influence their judgment. They focus on trading well.
- Amateurs keep thinking what trades to get into, while professionals spend just as much time figuring out their exits.
- When they have a winning position, they don’t let their emotions dictate when to close the position, which would result in small gains. They know emotions cannot be part of the decisions.
- When they enter a play, they don’t have any expectation. They understand it can go either way and that nobody can know the future.
- They have confidence in their plan, patience, and discipline.
- They are not afraid because they have developed attitudes that prevent them from getting reckless.
- They have self-monitoring skills and can continuously monitor their performance in order to improve it.
Some Truths about Trading
- The market is a huge crowd of people. Each member of the crowd tries to take money away from other members by outsmarting them. Everyone, including some of the brightest minds in the world, is against me and I am against everyone. It’s every man for himself. The money I want to make belongs to other people who have no intention of giving it to me.
- The market is like an ocean, it moves up and down regardless of what I want. The market does not know I exist and I cannot influence it. I cannot control the market any more than a sailor can control the ocean, but I can control my own behavior.
- Trading is all about management – managing myself, my money, my attitude, and my positions. It is not about predictions, forecasts or opinions.
- There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time. No man can always have adequate reasons for buying or selling stocks daily or sufficient knowledge to make his play an intelligent play (Jesse Livermore).
- Trading without imagination is like painting by numbers – and is about as rewarding(William R. Gallacher).
- The market is not going to reward anyone for observing the obvious.
- A mistake made by many traders is that they become so involved in trying to catch the minor market swings (generating lots of commissions in the process) that they miss the major price moves.
- Advisors are only wrong when you get too many of them start thinking the same thing.
- A strategy to enter and exit trades will not help you unless you are both disciplined and organized.
