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What Are The Characteristics Of Successful Traders?

13 May 2015 in Investing Insights

Whether you’re a retail investor who trades his/her own portfolio or a heavy hitting Wall Street trader crossing billion dollar blocks for institutional investors, the characteristics of being a successful trader can be the same.

Numbers don’t lie. You’re either making money or you’re losing money. Sometimes you get lucky. Sometimes you make incredibly careless errors that could cost you dearly. There’s no better meritocratic environment.

Universities such as MIT, forensics experts, and even traders themselves have studied the characteristics of successful traders at length. Do you possess the characteristics of what it takes to become a successful trader?

CHARACTERISTICS OF SUCCESSFUL TRADERS

Detail Oriented – It shouldn’t come as a surprise that being detail oriented is important to being a successful trader. Type a ticker wrong or fat finger a quantity and things can go south very fast. A suspected typo of 16 billion vs 16 million shares of Proctor & Gamble led to a significant dip, albeit temporary, in the markets back in 2010. And several hours of trading were halted on the NASDAQ in 2013 due to human error. Accuracy and being detail oriented are critical for trades to run smoothly. Nobody wants to deal with the stress, costs, and complications of human error.

Organized – Alongside being detail oriented is having a knack for organization. Successful traders can keep track of multiple orders and follow through until everything is fully executed. Fall asleep at your desk or forget to complete an order and the consequences could be ugly. Traders are also able to keep track of all of their trading records, likely through the use of software, so data doesn’t get lost or reported incorrectly.

Patient – Experienced traders don’t expect to make profits quickly. Value focused traders in particular are known for their patience since it can take long periods of time for undervalued securities to become profitable. Having patience can also go a long way when the markets or specific securities are taking time to recover, and avoid making a move too soon.

Able To Face Fears And Move Past Losses – Successful traders learn from past losses and move on. It’s impossible to make money on every single investment and traders realize this. So instead of harping on losses, accomplished traders use those experiences to adjust their strategies and plans on future trades.

Adaptable – There’s no doubt the economy and markets are constantly changing. Successful traders are able to recognize shifts and changes that may affect their existing and prospective holdings. Being adaptable and quickly accepting change can come in handy and lead to more profits.

Proactive Not Reactive – A rookie mistake that inexperienced traders may make is overreacting and making rash trading decisions. Experienced traders think things through before making decisions, and recognize the downsides to overreacting and reacting too soon. Keeping a keen eye out for the latest trends, from what cars people are driving, to the brand of shoes the kids are wearing, are just a few of the ways you can get new investing ideas to research further and proactively invest before the market becomes overbought.

Disciplined – The ability to focus and stay disciplined is important as a trader. Sticking to a plan, actively watching the markets, and following through are essential. An undisciplined trader could lose out on profits by overlooking significant market movements, missing industry trends, or even losing sight of his or her trading strategy.

Put Emotions Aside – You’ve probably heard someone say it isn’t wise to get emotional when investing and making trades. Research has shown that traders who are too emotionally impacted by their daily gains and losses perform worse on average than those who don’t get overly emotional. Getting too emotional can lead to overreacting, poor decision-making, and losing focus.

Look Past The Hype – It’s easy to get pulled into believing everything you read and hear in the media. However, things can get overdramatized, taken out of context, or overplayed on the news. Successful traders think for themselves, have their own opinions about current events and market trends, and make their own conclusions without getting overly drawn into the hype.

Embrace Their Inner Psychopath – Oddly enough, studies have shown that the desire traders feel to win at all costs is greater than what psychopaths’ experience. According to one German study, part of the reasoning behind this is traders are comfortable taking on more risk. Additionally, successful traders tend to make sacrifices to gain competitive advantages over others. Perhaps the craziness of high stress and adrenaline rush environments that successful traders thrive on is also a contributor.

LEARN FROM SUCCESSFUL TRADERS TO GROW YOUR WEALTH

While being a professional trader may not be in your cards, you can apply some of the characteristics of successful traders to your investment choices.

Staying patient, avoiding overreactions, and being disciplined are great places to start. In addition, analyzing, overcoming and learning from your past losses can also help you make better trading decisions going forward.

Motif Investing offers flexible investment products and services to help you build your wealth. Whether you aspire to be an active trader or prefer a buy and hold approach we give you the tools to create your own customized motifs, or select motifs from our catalog that suit your investment needs.

Photo Credit: https://www.flickr.com/photos/petrick/2291498814

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