The 7 habits of a highly successful trader
The French writer Andre Maurois was quoted as saying that if If you create an act, you create a habit. If you create a habit, you create a character. If you create a character, you create a destiny.
In other words what we become and what we achieve or don't for that matter is to a very large extent down to our habits and routines. It's therefore no coincidence that highly successful traders experience high levels of achievement because of certain habits they have formed. Below are seven habits, which are key to the success of top traders.
1. Be disciplined
Upon finding a trading system that has positive expectancy and which suits your character and circumstances stick with it's rules, don't second guess it. Also, be there for when the forex markets are most likely to deliver potential trades for the system you use.
2. The buck stops here
One of the most positive benefits of taking responsibility for the outcome of one's trades is personal empowerment. It strongly implies a sense having the ability to adapt and improve and that's very powerful. On the other hand, the blame game leads to a sense of helplessness and an inability to make progress.
3. Think probabilities
Most things in life come down to probabilities – getting that job, finding the right place to live in or even a compatible partner. That's certainly true of trading and investment. The laws of probability dictate that some trades will be unprofitable – it's a cost of the business and top traders are well aware of that and factor it into their trading plans and their emotions.
4. Position for survival
In many respects the fictional character Gordon Gekko in the film Wall Street was a terrible role model for traders as he was greedy, vindictive and egotistical. It's the sort of characteristics that lead to reckless over-confidence and the illusion of being smarter than the market. However, he did impart one piece of very useful advice to his young apprentice Bud Fox:
The key to the game is your capital reserves. Without capital reserves you can't piss in the tall grass with the big dogs.
For a trader that means keeping the amount at stake on each trade small. The great traders recommend less than 5% some even go as low as 1% - that means a trader can endure a string of set-backs and still have enough capital to fight another day and to stage a comeback. Trading is essentially a defensive game and capital preservation is of up-most importance.
5. Those petrol emotions
High emotions are like gremlins, which stalk every trader poised to sabotage success. A string of losses leads to despondency and a run of profits to euphoria, which often results in over-confidence and over-trading. Top traders develop a sense of perspective and find mental rituals to minimise extreme emotional responses. Good money management can help reduce nerves and accepting that losses will often occur regularly and even sequentially can impart a sense of perspective. It's vital not to take losses personally and to congratulate one's self if they occurred as part of disciplined trading. That might seem contradictory, but developing discipline and forming the right trading habits is far harder than finding a profitable trading system. And it's only when good trading habits are formed that a trader can really make money out of a good trading system over the long-term.
6. Keep it real
Trading is ultimately about the long game – it's having enough capital and emotional reserves to make it sustainable. That means being sceptical over claims of some fantastic system, which makes huge profits and succeeds 95% of the time. It also means being wary of following tips. It's far better to be independent and to adhere to a trading system ideally suited to one's character and circumstances.
7. Have a life
And finally trading really isn't everything though sometimes it can seem like the only thing that matters when in the thick of it. Take time off from the market and forget about it for a bit and have some fun. This helps keep trading in perspective and is a reminder that there's more to life. Taking a break from it every so often is also refreshing and energising.