The very best traders and investors have certain common traits or characteristics that separate them from the rest. Obviously, they have superior trading knowledge and the discipline to follow successful strategies, methods, techniques and principles. What other qualities do trading legends, who have amassed fortunes, share in common?
One important trait they share in common is the drive and perseverance to be the best. It takes years of proper trading education and experience to be consistently successful in the marketplace. Giving yourself enough time to learn is absolutely crucial to become a top trader or investor. Once you maximize your trading ability, the sky is the limit.
Confidence is vital. A world class trader has this quality because he or she has developed an edge with their trading plan. They know it’s not important to win or lose on any one particular trade. The odds or probabilities are in their favor long term and like a casino, they will become wealthy over time. Executing trades or getting out of trades is automatic with the best traders. There is no guesswork involved.
All top traders or investors use a methodology that fits their personality or trading style. Every trade they enter, the odds are in their favor. That’s because a position is only taken when as many factors as possible are in their favor. Analysis is totally objective and usually trend following in nature.
Elite traders treat trading as a serious business. As mentioned before, it takes years of proper trading education to be a top trader. Doctors, lawyers and engineers go to school for years before becoming professionals and earn a living. It’s exactly the same for traders and investors.
Money management or risk control is the secret to success. You must always cut all losses short. Accept a loss when it’s small. Always know what you are willing to risk before entering a position in the market. Protect your capital. Risk only a small part of the total on any one trade, 5% or less. All top traders and investors use rigid money management. A great trader of the past once stated “Take care of your losses and your profits will take care of themselves”. No truer words have ever been spoken.
One of the most important traits shared by the world’s best traders is patience. It’s absolutely critical to wait for an excellent trading opportunity to develop. This could mean watching markets for weeks or months. Wait for a clearly defined situation. Don’t buy unless the opportunity is exceptional. Another important part of patience is to stay with a winning trade until you know the trend has changed. This should be only happen through objective analysis according to your trading plan.
The world’s best traders usually do not follow the crowd. The crowd tends to be wrong, especially at key turning points in the market. Think for yourself. Be your own person. Be independent. Always try to avoid the pitfalls of responding irrationally with the crowd. A good example of this would be the dot.com fiasco early in 2000. The herd mentality caused many people to lose a lot of money.
The trading elite tend to be quite flexible in the marketplace. They are objective and change as the market environment changes. They recognize a mistake and correct it immediately. Top traders are always prepared to take alternative action if the market moves differently from what was expected. This is the ability to adapt.
All top traders and investors understand psychology when it comes to the markets. Many times the correct thing to do goes directly against human nature. Keeping emotions out of trading is vitally important. Don’t become over-optimistic or over-pessimistic. Have no ego. Consistently follow your trading plan.
Last, but certainly not least, is the fact that all of the world’s best traders and investors love what they are doing. This certainly is a must.
Gary E Kerkow is Chief Investment Strategist for Tradingmarkets4u.com. Over 20 years of trading experience including stocks, futures and options. Uses the strategies, methods, techniques, principles and psychology of the world’s best traders and investors. This includes Jesse Livermore, William J O’Neil and others. Visit my website at http://www.tradingmarkets4u.com.
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