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Larry Swing is the President of the popular day and swing trading site www.mrswing.com a place where you can find free daily articles and videos covering education, market analysis and picks from Larry and other well known traders in the industry.
May 7, 2008
- There are a few habits and traits that show a trader or investor has really matured and that eventually lead to consistent success in the markets...
There are a few habits and traits that show a trader or investor has really matured and that eventually lead to consistent success in the markets. Although these are not a complete list, they are some important ones that carry weight.
1. Patience - This is the most difficult to master. In a world where instant gratification is the norm and expected, going against the grain and the crowd can be extremely difficult. This is NOT a game where 95% are winners and 5% of losers. Just the opposite, around 5% are winners and often they win because they go against the crowd. Being patient does have many benefits: filter out the bad setups, reduces overtrading.
2. Open Mind/Flexible - This mindset is part of maturing. Understand that the market is somewhat chaotic and accept that anything can happen. There is no guarantee that the market will do what is expected. Most traders understand the market a small percentage of the time where things seem to make sense to them and can manage to trade profitably off it. But the rest of the time trades can go nowhere and the trader has no idea what's going on. Accepting losses is part of being flexible. Likewise, moving on and not letting the market affect the next trade, though hard, is also a sign of maturity. Great traders are also highly adaptable and undogmatic. They may even have different strategies for different market conditions and different markets. Though they do not pull these theories out of the air willy-nilly. They observe, study and practice.
3. Confidence - Trading with fear and without confidence will force the trader to divert from or even abandon his trading plans. Confidence is a must in order to stick to your rules and trust that the trades you choose have a high probability of being profitable. It is a long process in acquiring it. This is difficult because in order to have confidence in yourself, you must have confidence in your abilities to see the market from different viewpoints and a wider picture that most others fail to see. I would like to tell you there is a magic formula for this, but, it really does come down to hard work and study, experience and constant learning.
4. Discipline - Patience and discipline go hand in hand. One cannot work without the other. The ability to follow the rules is a must because without rules, there is no way to find and wait for the high percentage setup. Success comes from filtering the bad setups from the good and your rules and trading plan define what those good setups are and they must be obeyed in order to consistently generate profits. The other side of discipline is emotion-driven action or lack of discipline. Emotions play an important role in traders, they lead them to making wrong decisions the majority of the time. Greed and fear are the two emotions that creep up again and again and this is seen every minute of everyday in the markets. Chasing, taking profits early, overtrading, allowing a small loss to go to a large loss are examples of lack of discipline.
5. Understand percentages - This is the game of probability. Anyone with this idea will come out better than most. It's like batting average in baseball: players who hit 3 out of 10 times are considered very good players. So 7 times these players are wrong. So accepting losses is a normal part of trading. There are different types of losses: large and small. Small losses are acceptable while large losses are not. But, you must define what is a small loss for yourself, make it reasonable, don't bet the farm. Remember that money management may be unsexy, but it's often the most important part of trading.
6. Understanding oneself - Self awareness is essential. Successful traders understand themselves and their own actions, intentions, and thoughts better than most traders. They are very aware that whatever their actions may be, they are deliberate. They can reason all their actions step by step with a plan. They don't make emotional trades and rationalize them afterwords.
...thanks
for the trust you've shown in me and my business.
by Larry Swing larry@mrswing.com May the swing be with you...
P.S.- Oh
yes by the way...if you're looking for trading software at half the
price I suggest you try out what I use... Swingtracker. I think you'll
love it. Download it now for your 4 week free
trial. It's stock charting and scanning software that has everything
built in for you and ready to go... Check
it out now...
Disclaimer:
Please note
that charts and commentary provided by the moderator are for educational
purposes only. Any trades placed upon reliance on the moderator’s
charts or information is taken at your own risk for your own account.
Past performance is no guarantee of future results. While there is great
potential for reward trading stocks, futures and options, there is also
substantial risk of loss and you must decide your own suitability to trade.
Future trading results can never be guaranteed. This is not an offer to
buy or sell stock, futures, options or commodity interests.
Most trading
systems are based on historical formulas which have worked in the past.
However, what has happened before may or may not happen again. You can
lose all your money trading stocks, futures, and options and you must
decide your own suitability as to whether or not to trade. Only trade
with true risk capital you can afford to lose. Only trade markets you
can properly afford to trade. Properly funded trading accounts typically
perform better than those that are not. Never risk more than 2-3% of your
account on any one trade. Always define your risk before entering a trade
and place a stop to limit your risk.
There are
no guarantees or certainties in trading. Trading involves hard work, risk,
discipline and the ability to follow rules and trade through any tough
periods during a system’s draw downs. If you are looking for a guarantee,
trading is probably not for you. Most people lose money trading. One of
the reasons is that they lack discipline and are unable to be consistent.
A system can help you become consistent. Ironically, worrying about the
monetary aspect of trading can contribute to and cause a trader to make
trading errors. Therefore, it is important to only trade with true risk
capital.
