Here are ten things I believe are needed to be a great trader. It will surprise some that predicting, having conviction, reading a balance sheet, or stock picking is not on here. Over the long term the trading game is won through proper risk management, mental discipline, and the ability to create and follow a wining trading system. Everything else is just noise.
Ten Ingredients That Make Great Traders:
- Passion for trading: Only passion can fuel the work ethic needed to do all the homework that leads to success.
- Goal oriented traders succeed: If you know why you are trading and the goals you want to accomplish you may just get there.
- Perseverance: If you never quit only time separates you from success.
- Resiliency: The ability to come back from drawdowns may be the secret to trading success.
- Back testing systems: Doing the historical studies before trading a strategy speeds up the learning curve and side steps a lot of learning through real losses.
- Understanding your edge: Trade only when your edge is present is crucial to out performing the traders that lose money.
- Great traders understand that a winning system has to have either bigger wins than losses or a high winning percentage with equal sized wins and losses.
- Keep losing trades as small as possible is essential for profitable trading along with leaving profitable trades open ended to the most upside possible.
- Flexibility allows a trader to take the signals the market is giving while sticking to the conviction of opinions can lead to huge losses.
- Disciplined use of a trading plan is crucial instead of the ups and downs of making decisions based on emotions.