When you thought first time you want to become a trader, what was the first question that came to your mind? It may be anyone of the following. What personality traits should I have to become a successful trader? What kind of attitude I should have towards the markets? Is it necessary to have good knowledge about fundamental & technical analysis before entering the markets? Who can become a successful trader? What kind of strategies I should follow to make money?
The first thing you need to do is to inculcate the some of the qualities in yourself. We believe, anyone can become a good trader but following are the important personality traits that a trader should have:
Passion:
The first thing that a trader should have is the big word “Passion”. “Passion is something that reflects in your personality, in your communication, in your attitude & in you.” If you are passionate about something you start enjoying it & it doesn’t remain your job or profession anymore but it becomes part of your lifestyle.
There are people who sit in front of the market since the opening of the market till its closing on daily basis. Many times they don’t do even a single trade in the whole day. But if they don’t sit in front of the market for few hours or a day, they feel that there is something missing in the routine. That’s the passion about the market.
If you are watching the markets on a consistent basis, you become a better decision maker. You are a better judge of the market even better than the experts. It’s always exciting to deal with the numbers. “If reading and understanding numbers is your passion, you can become a good trader.”
It is not necessary that you are exceptionally intelligent to become a successful trader; or you should have a very sound knowledge of mathematics or statistics. Any average person with little bit knowledge about the stock market can become a successful trader. Trading is a competition; anyone who follows discipline and keeps a continuous watch on the market emerges as a winner.
There are many of successful investors in the world and instead of saying anything else I would rather say that they all are exceptionally intelligent. All the investment decisions are made after making a lot of research. Investors satisfy themselves with the growth of the company and sustainability of that growth in the coming years. They don’t make any investment unless they feel everything in the company is going in the right way including business model, market share, customers and expansion plans etc. If your one decision go wrong it may eat out substantial part of your investments. You don’t get a chance to review your decisions and again you will have to start the process of research and churning your investments. In history, few examples are there which proved investment research can’t tell you the exact position of a company. Satyam Computers and Lehmen Brothers were big shocks for the investors which forced them to go back and review all their investments.
But as a trader these can be considered as best of the opportunities to make money. Remember one thing if you feel you are stuck in a wrong position you need to hit your out (stop loss) immediately. Investors can make money only on one side of the market/stock whereas, a trader can make money on both sides of the market; they just need volatility on either side.
Confidence:
Always the next big thing is ‘Confidence’ to be successful. You should have confidence in whatever you are doing. “Sometimes you may be right sometimes you may be wrong. The most important thing is the execution and for execution confidence is the most important quality.” Especially for a trader; confidence can turn you to be a victor. Lack of confidence will lead to doubt, second-guessing and you will miss out on various opportunities to make profits. It also leads to frequent losses; when you create a position after a long wait, you may be in a wrong position and that will force you to exit. You must believe in ‘yourself and your decisions’ to become a successful trader.
In trading fast and wrong is right and slow and right may be wrong. The statement says that if you are confident enough to hit a position, you should hit it immediately otherwise, you will be late and you may be picking up tops and bottoms of the stock. If you are wrong, you always have the option to hit your out (stop loss) losing a couple of bucks. You should be fast enough to create the position at the right level and if you are wrong you should hit your out (stop loss) faster. That will help you to control losses and protecting profits. If you are slow and create a position after a long wait, you may have already missed the move. After creating the position you will not be able to hit your out as you are slow and can’t make a decision quick enough, which will lead to ruin. Confidence will help you to create the position at the right levels and hit the outs (stop losses) with minimal losses if you are wrong. So always remember;
“In trading fast and wrong is right & slow and right may be wrong.”
Discipline:
Exercising ‘Discipline’ in trading can help you to be consistent. Every game has some rules; on the similar lines trading is also not an exception. Exercising discipline even in worst of the times can keep you out of the big trouble. There is a routine that you need to follow till you are part of trading. Do not allow emotions like ‘fear and greed’ affect your trading decisions.
You should be in the market at least half an hour before the opening of the market. Do the necessary research to keep yourself updated with any major event or activity which is going to happen during market hours and which can affect the volatility in the market e.g. interest rate decisions, fed announcements, inflation, future & options expiry and earnings etc. If you are aware, you will not be surprised by any violent move in the market or stock of a particular company. Every day you should be ready with three stocks which you are going to trade today & find the important information on the same. When market opens in the morning you should be watching those stocks if those stocks don’t move then you should go ahead and look at the filters (high & low) for stock selection. Trade easy money not hard money and so on….
It takes some time to follow the system in a disciplined manner. You should avoid mistakes and do the things as simple as you can.
Decisiveness:
Market keeps on moving, it doesn’t wait for anyone to take decision. Therefore, you need to be very-very quick in your ‘Decision-Making’. “Decision has to be prompt on both the sides either on creating a position or removing the same.” When you are in the market it’s not necessary that you carry a position all the time, you need to sit like a mercenary guerilla and wait for the right opportunity to make a trade.
There may be few trading opportunities where you can make profit and many trades to make loss, but always remember that your losses should be very limited so that it doesn’t eat up all your profits.
Sometimes market is stuck in a range and you are not able to enter a trade, so you make two or three trades in the whole day and losing or making a couple of bucks. These days are considered as learning curves which will eventually help you to become a better decision-maker in the long-run.
Don’t enter a trade without a reason. When you create a position, you need to be sure of two things; one reason for the entry and second out (stop loss). Every-time you can’t be right to judge a trade so if you are wrong hit your out (stop loss) immediately without any concern. Therefore deciding the out (stop loss) is equally important as reason of entry to a trade.
“When you create a position with a reason, hold on to your nerves; but always remember you may be wrong, market is always right.”
Ability to accept failure:
Good traders know that many of their trades would not go as per their perception. However, they also know that no one else should be blamed for a bad trade. A good trader takes credit of all his trades whether good or bad. Never ever use the language of a shaky trader:
- Market is very choppy today.
- Every time market goes against me.
- Why my stocks are not moving with the market.
- Instead of all good signals market is not going strong and so on…
Being a good trader you should avoid all this. Don’t shake your head and always stick to the basics of the trading. Don’t try too many things. You can’t blame the market or anyone else for your losing trades. It’s only you who is to be blamed or appreciated for bad or good trades. Following trading mantra would help you to hold on to your nerves & eventually emerges as a successful trader.
“If you made a bad trade, forget it; if you made a good trade, forget it quicker and keep on moving till the market is on.”
Ability to accept risk:
A trader is comfortable with ‘Risk’ and prepared to lose money from time to time. If you are afraid to lose money, then day-trading is not your cup of tea. Risk is associated with every activity in day-trading.
When you create a position, there is always some risk associated with it. All the golden rules of trading carry risk with it e.g. “A good trader is never afraid to buy a stock which is hitting new highs or sell a stock which is hitting new lows.”
Experts in trading say that keeping an out will help you to protect your money which will eventually help you to make profits. Taking calculated risk and keeping loses under control is the mantra of success for any day-trader.
“People misunderstand equity markets, they think that market can understand their sentiments; but they forget that the market is the output of sentiments of millions of people around the world.”