Characteristics of a Successful Trader

Discussion in 'Professional Trading' started by EricP, Dec 13, 2008.

  1. EricP

    EricP

    Most successful traders I know are tightwads with their money. While this is not a criteria for being successful, I think this is a characteristic that helped <i>lead</i> to their success.

    Ben Franklin once said "A penny saved is a penny earned" => I can't think of a career where this is more applicable than it is in trading.

    Being a tightwad puts the trader in the right mental state to become successful in their trading. I'll suggest several examples:

    - A struggling (by tightwad) trader has much lower living expenses than a struggling trader with a high lifestyle. Therefore, the tightwad may be able to survive 12 months of learning curve, while the high living trader will find another line of work when his savings evaporate after 6 months.

    - A tightwad trader carefully reviews of all their trading expenses, focusing on every angle for where they can save some cash. Do I really need that $5-7k trading seminar, or will I be better off saving the cash and learning directly from the markets? Are the commission rates that I'm paying really fair, given my trading volume (and re-asking this question over and over as your volume changes)? Which routing option is best for my order executions, in light of the various routing fees and performance?

    Not amount to save is too small for the tightwad trader, and it all adds up. Think about it, successful trading is all about making money. It's about selling for more than you paid for it. It's about making dollars, or nickels, or pennies from your trades.

    Let's think about is some more... You want to buy a stock on it's breakout at 25.17, but the stock got away from you and it's now 25.26, do you still buy the stock? It's 'only' nine cents above your intended price. Well, the tightwad would likely admit that he wanted it at his price, and now that price is not available, and he's not going to 'pay up' for the stock at these 'expensive' levels. The successful tightwad might accurately realize that his average trade generates only a profit per share of a couple of cents, so giving up nine cents on an entry likely makes the trade very suspect at these prices, indeed.

    Note: Certainly, once a trader becomes extremely successful, they can 'afford' to increase their spending. However, most tend not to spend excessively and live way beneath their means. This is also very important, and prudent, as most traders have only their own savings to support their retirement and health insurance for their lifetimes, so it's best to build a sizable lifetime nest egg, prior to spending excessively.

    Along these lines, the tightwad trader realizes that the 'glory days' of trading (whatever that means) may end tomorrow. As a result, they want to ensure that their savings will last forever, in case their trading income drops to zero beginning next week.

    For many, many reasons, I think having a tightwad mindset is an important characterist of many successful traders (as well as many unsuccessful traders that are headed towards success).
     
    #11     Dec 13, 2008
  2. EricP

    EricP

    A successful trader is skeptical. This is especially true when it comes to trader 'education'.

    When people tell you trading is easy, you should be skeptical. When companies tell you that they can teach you how to make $100k+ per year trading, you should be skeptical. When a newspaper advertisement tells you that you can make $6k per week from your own home using EBay, you should be skeptical.

    When things sound too good to be true, a successful trader (or struggling trader bound for eventual success) don't not take the bait.

    Trading is difficult. Trading is not something that you just sit down the first time, and begin milking the market for $1k per day. Granted, successful traders will make over $1k per day very consistently, and it will look easy. But, it takes a long time to master the skills need to be able to duplicate that success.

    Let's discuss briefly about seminars, paid chatrooms, newsletters, and bootcamps.

    I chuckle thinking back at the Online Trading Expo, which I attended, last month in Las Vegas. The expo hall was filled with vendors begging to give you the secrets to untold wealth, if only you'd pay their modest fee for the answers. Tell me, if anyone had the stated secrets to untold trading wealth, why would they be sharing them with you? And for such a bargain price of only $59 per month (or one time fee of $3500, or whatever)? Why would anyone sell you something 'worth' $100k+, for only $250? A skeptical person would simply laugh and move on.

    => If it looks like a ripoff, and smells like a ripoff, then it like IS a ripoff. The successful (or soon to be successful) trader doesn't fall for get-rich-quick schemes, and aren't interested in the 'easy way' to become successful. Those subject to taking the bait and falling for these schemes will only waste time, money and often their hope of ultimate trading success.
     
    #12     Dec 13, 2008
    Gambit likes this.
  3. EricP

    EricP

    Moderator: If possible, could you move the earlier reply posts (by others), to the end of my initial posts? I'll try to post another 3-4 random thoughts and then welcome the input from others. Thanks.
     
    #13     Dec 13, 2008
  4. EricP

    EricP

    A successful trader <b>hates</b> to lose. Typically, these are ultra-competitive people, that play games to <i>win</i>. They are people that either want to be the best, or don't want to try. There is no half way.

    Certainly, successful traders lose, at times. But, they are always focused on improving their 'game'. Like an Olympic athelete, the successful trader is constantly focused on improving every facet of his/her performance, working on weaknesses, to make them strengths, identifying and mastering new techniques and skills to add to their trading arsenal.

    Winning and losing is not just fun for these people, it's personal. They choose <i>not to trade</i>, <b>when the alternative is losing</b>. And even consistently successful traders realize that there are times when the odds are just not in their favor, and they step aside and don't trade during these times.

    => They don't trade for fun, they trade to win.
     
    #14     Dec 13, 2008
  5. EricP

    EricP

    The successful trader <b>LOVES TO TRADE</b>.

    Trading is almost an addiction for these folks. They have been known to dread weekends and holidays, and may avoid vacations (or at least trade every day of the vacation).

    These guys can't imagine ever retiring, because they're having too much fun. They feel as though they were born to trade, and that they've found their life's calling. They enjoy it so much, that they think about trading for most of their waking hours. Instead of wondering who is playing the late Sunday football game, they are wondering where the futures are opening. Instead of thinking about the latest electronics game or audio system, they are pondering methods to improve their trading system.

    Because of their 'love of the game' and constant focus on the financial markets, they tend to learn faster and retain information better than their peers, for whom trading is just a "j*b".

    People always tend to excel at things they love, and this is certainly true with trading.
     
    #15     Dec 13, 2008
  6. EricP

    EricP

    For the successful trader, success is no accident. They have put in the work, have created one or more trading strategies, and <b>know</b> that they will succeed in their trading.

    I could list a dozen or more of my trading acquaintances that post here on ET, and tell you (with complete confidence) that they will be profitable in 2009. These are successful traders.

    Because of their traits and characteristics (many of which I've already discussed), their success for next year is a given.

    While any given trading day could be profitable, or not, they <b>know</b> they will win in the long run. This self confidence enables them to think clearly during stressful market conditions, and more often than not, do the right thing when needed. This confidence gives them the ability to make cool-headed decisions, when others are losing their heads.

    Self confidences comes from experience. It comes from putting in the time and effort to develop and validly test a trading idea. It comes from having a proper attitude towards the market, and being able to logically listen to what the market is telling you with a cool head.

    While I believe that success leads to self confidence, a certain degree of self confidence may be required to achieve success.
     
    #16     Dec 13, 2008
  7. EricP

    EricP

    A couple of final minor thoughts come to mind:

    Many successful traders tend to be 'numbers people'. They are people that maybe have a math, physics, programming or engineering background, or possibly just have always tended to do well with numbers.

    Successful traders know that they should maximize their gains during the 'good times' and slow (or stop) their trading during poor trading environments. Note that a 'good' or 'poor' environment will vary from trader to trader, based upon their trading style.

    Successul traders know that their #1 priority, at all times, it to protect and preserve their capital. => No capital, no trading. So don't lose your capital! Blowups are almost 100% of the time, a result of irresponsible trading. Don't ever 'risk' your career choice, as a result of a single trade or bad week/month. Ever!

    Okay, those are my initial thoughts. Let's please keep this thread civil, and if you choose to post, try to add value to the thread with your post (with either a question or comment).

    Best of trading success,
    -Eric
     
    #17     Dec 13, 2008
  8. EricP

    EricP

    While I don't dispute that emotional traders can be successful, I would question whether those emotional outbursts put them in the best mental condition for their subsequent trades. All things being equal, I would much prefer the odds of success for a trader that avoids getting too emotionally involved in their trading. Every trade should be 100% independent of their prior trades, and throwing a hissy fit would make this difficult, IMO.

    That said, remaining emotionless is not easy (certainly, as you point out, this is not nearly as difficult with automated trading). However, I believe cold hard facts should be used for the basis of trading decisions, and wild emotions throw a new, random variable into play which is not helpful, IMHO.
     
    #18     Dec 13, 2008
  9. volente_00

    volente_00



    Now you are getting there.




     
    #19     Dec 13, 2008
  10. EricP, absolutely exceptional thread.
     
    #20     Dec 13, 2008