There are seven things that I have seen in common with the successful traders I have known, studied, and seen in action in real time. Whether it was stock trader Nicolas Darvas in the sixties, commodity trend follower Ed Seykota in the twentieth century, or the ups and downs of Jesse Livermore at the turn of the last century, many of their principles hold true to this day. The closer I get to these principles, the better I trade. The farther I strayed from them, the worse I did. In trading, discipline pays.
1. Traders must have the perseverance to stick to trading until they are successful. Many of the best traders are the ones that had the strength to push through the pain, learn from their mistakes, and keep at it until they made it as traders. All the profitable traders had to survive the learning curve. Avoid the risk of mental and financial ruin.
2. Great traders cut losing trades short. The ability to accept that you are wrong and put your ego aside is the key to personal and professional success. The art of setting proper stops is one of the top skills for a trader to learn. They need to be close enough to keep losses small but give enough room for a profitable trade to play out.
3. Letting a winning trade run as far as it can go on your time-frame, insures that you have big enough wins to cover your small losing trades. The key to profitability is managing a winning trade for maximize win size.
4. Avoiding the risk of ruin by using a small portion of your capital on each trade. If you risk it all often enough, you will lose it all eventually. Small win percentages can compound into huge gains without the risk of large drawdowns.
5. Being reactive instead of predictive on actual price action is a winning principle I have seen in many rich traders. Letting price lead the way is one of best strategies for cig wins through catching trends.
6. Letting price action give you signals is trading reality. Trading based on what the price should be is wishful thinking. It can take a long time for a market price to become what you thing it should be while trends can happen fast for no apparent reason.
7. Great traders are bullish in bull markets, and bearish in bear markets, until the end when then trend bends.
Great traders care about making money more than anything else; proving they are right, showing off, or predicting the future is not as important as hearing the cash register ring.
Adopt these seven habits of highly successful traders to increase the probabilities of your success in the markets.