“Some are born great, some achieve greatness, and some have greatness thrust upon them.” is a famous quote from William Shakespeare. With research firmly suggesting that more than 90% of day traders lose money in the long run, the Forex market surely is not for the fainthearted. What is apparent is that the 10% that thrive in Forex market do not depend on sheer luck or mere coincidence but possess superior skill and superb character. This article endeavors to educate traders and aspiring traders on the traits of a good trader. The key fundamental traits of a good trader
Going through High school one of the lessons that I learnt from my teachers is that discipline constitutes half of a person’s education and if that half is missing then the other half is not there. The same with Forex trading, discipline is everything. Discipline needs to be exercised at all times and not sometimes only. No matter what strategy a trader pursues they should be disciplined enough to follow through their chosen strategy.
As Jim Rohn right says, ”Discipline is the bridge between goals and accomplishment.”
- Losing is part of the game.
The greatest weakness of most traders is loss and regret aversion. Loss aversion suggests that investors tend to be disproportionately risk averse in relation to their expected outcomes in order to avoid the pain associated with financial loss whilst regret aversion posits that investor indecision and failure to take action typically stems from wanting to avoid responsibility for a poor result. Such behavior manifests itself in failing to trade even when the strategy says so, trading without a stop loss, moving stop loss targets, exiting winning trading positions too early, leaving loss making trades open and poor money management techniques among many However a good trader does not suffer from this syndrome. A smart trader should accept that losing money is part of the game and the sooner this fact is realised the quicker the recovery period. A great trader learns from the losses and uses the experience to adjust strategy accordingly and be disciplined
A good trader always strives to acquire new knowledge. The markets are continually changing and a good trader need to keep abreast with the new trends and developments. As a trader adds to his or her body of knowledge it will become easier to adjust and refine the trading strategy, interpret news and market movements and analyse both fundamental and technical aspects of the market.
Everyone is unique and their trading should reflect the uniqueness of individuals. A good trader relies on his own trading style and strategy. A trader should make use of indicators, news and other tools that they perfectly understand generate trading ideas and not rely on other peoples’ strategies. It is of paramount importance to match the personality of the trader with the kind of trading philosophy.
He who does not plan, plans to fail. A trader with a plan is more likely to be successful than a trader without. The plan should be simple and easy to understand. It should answer questions like, what are the goals and objectives and how to get there? The trading plan should also speak to risk management aspects like How to protect against losses and the point at which to take profits?
A good trader should be proactive rather than being reactive in all situations. A trader needs to know the dangers of overreacting and make quick decisions without thinking. The ability to become a better decision maker will arise from experience gained in trading. A proactive trader knows every possible move ahead of time and does not react to what the market gives.
Patience is a virtue in trading. A successful trader will be quick to take losses and slow to make profits. Unsuccessful traders usually take profits quickly because they've never had them before and fear losing them. This is was partly explain in loss aversion above. A goof trader waits for the perfect trading opportunity and does not rush to trade for the sake of trading. Wealth isn't built in a day or a week - it is slowly accumulated with consistent trading strategies.
Most successful traders have records of all their trading activities. A trading journal or trading book is a must have for a trader. A book or a excel spreadsheet can be used to keep track of the trading activities. Having the right records to refer from will avoid a trader from making wrong decisions and thus avoiding losses.
- Balance life outside trading
The ultimate goal of most traders is to make money and achieve financial independence. However, it should be understood that life needs to be enjoyed and not suffered in the name of sacrificing for the sake of trading. Most traders spent sleepless nights, skip dinner, drive with the eyes on the mobile trading application Go to the gym, take a walk, eating right and do something other than sit in front of the trading screen all day for God's sake!
A good trader should possess good analytical and mathematical skills. This can be acquired through education and undertaking the right training and courses. It is a crucial trait for a trader to know how to think for oneself without being influenced by the media and the news. Having a good working knowledge of the maths is crucial as a trader will be able to understand and estimate very precisely whether certain actions are likely to be profitable or costly.
Though the list is not exhaustive, it surely helps most traders achieve greatness as possessing the right qualities is the starting point to be a successful trader. One thing that is clear is that we are the greatest enemies to our success. Before venturing into the market it is important to start working on oneself so that there can get rid of undesirable elements. Greatness is achievable.