Being successful as a stockmarket trader is no different to being successful at other things in life. It requires the right mindset to cultivate the set of core habits that lead to success.
Here are 10 habits all successful traders share.
1. Discipline
Highly successful traders write down their set of rules and follow them with military style precision down to the last detail, at all times and for every trade. They do not let emotions interfere with their trading decisions. They never second guess themselves and promptly take action on market signals according to their rules. They never trade outside their trading system because they have learned that doing so will just mean reducing their chance of success, risking not only the loss of more capital, but a loss of their winning edge and the ability to recognize other potential market opportunities.
2. Passion
Traders who become successful in the stockmarket are passionate about what they do! They are usually driven by other things than just making the money. They trade because they love trading! They want to be the best possible traders they can become.
3. Desire to Learn
Great traders never stop learning and improving at their game. They stay open minded to new ideas and concepts because they know that in order to keep winning, they have to stay ahead of the crowd and keep up with market changes and new emerging trends.
4. Confidence
Traders who reach the top of their game have enormous faith in their own abilities as traders. They are confident about their trading system and rules and their ability to continue to win in the markets. They know that they will win over the long term and therefore are confident taking small losses quickly by following their trading rules because they understand that their wins will far outweigh the losses they kept small.
5. Patience
Successful traders will patiently wait until a suitable opportunity arises before entering the market. They have long learned that they do not need to be in the market and trade all the time. After having entered a trade, they will exercise patience to give it enough time to work out in their favor, according to their trading rules. They know that profits take time to grow and therefore have learned how to stay with a winning position to maximize their returns.
6. Persistence
Top traders stick at what they do and trade the rules that they find work best for them and keep applying these to the market consistently.
7. Willingness to Lose
Traders who achieve any level of success have learnt that losing is a part of winning the game. If a loss presents itself, traders who are successful take it quickly and move on because they know that cutting their losses fast will restore their objectivity. If their trade does not work out as originally planned, the pros do not hang about hoping for things to work out - THEY GET OUT IMMEDIATELY!
8. Balance
Successful traders have no problem with taking time off from the market. They keep their trading in perspective and maintain a balance because they know there is a lot more to life than the market. Besides, it will always be there to trade when they come back.
9. Always use Stops!
The primary objective of a professional stockmarket trader is capital preservation. Cash preservation is King! It is so important that it takes preference over making money. A stoploss is the safety net that allows the trader to keep their losses small. Every trader who has achieved any level of success in the stockmarket has done so because they have learned to use a stoploss in their trading in the following two ways:
1 To protect their capital and limit losses when wrong.
2 To manage their profits on a winning position.
Stops should be placed with your broker at the time of placing an order for the trade. They should be automatic orders rather than mental stops because even if you’re the most disciplined person in the world, anything can happen in the market and you need to protect your trading capital whenever you put it at risk.
10. Always Trade with a Plan!
Successful traders meticulously plan every aspect of each trade that their system shows as a potential opportunity. A trading plan is a combination of each trader’s personal trading method with specific money management and position sizing rules, precise entry timings and absolute stops. It tells when to cut your losses short if a trade does not work out as originally planned. It addresses how to raise your stoploss to protect your position and profits on a trade that moves in your favor, shows when to take your profits, how to add to a winning position and how to re-enter a trade should you be stopped out prematurely. It should also have rules for staying with a winning position in order to maximize your profits when a trend unfolds.