The Personality Traits of a Successful Trader
When you learn about market trading, you’ll find statistics ranging from 80% to 98% of traders drop out in a year or two. While we don’t have a clear answer as to what percentage actually do stop trading, typically because they lost too much money or failed to make enough, we do know that most traders do drop out. Let’s look at the personality traits of a successful trader.
Several studies found that impulse control and self-control were better correlated with good life outcomes than intelligence. People who can stay focused on the task and finish instead of drifting away into various distractions are more likely to succeed. They are more likely to achieve their goals and stay out of trouble. This is especially true in investing. Good investors have impulse control; they don’t sell in response to the fear they feel when they see a sudden market plunge or frightening headline. They analyze and decide or let their system determine when to buy and sell. They are proactive but not reactive, either out of fear or irrational exuberance.
Impulse control manages the moment by moment impulses. The best traders are also disciplined. They make a plan and follow it over the long term; this is what Dave Ramsey says distinguishes children from adults.
Another variation of this theme is that they set parameters and stay within them. They don’t borrow money they cannot afford to repay, and they don’t dig up money from emergency savings to invest when emotions are high.
You can see discipline as a proxy for patience since patience can turn into procrastination as you use the excuse that you’re looking for the perfect opportunity to pretend you’ll eventually do something. This trait further demonstrated when someone takes some time to recover from a mistake and then starts over again with small trades to build up their account.
The best traders are lifelong learners, in contrast to the 50% of us that don’t crack open a non-fiction book after finishing high school. They keep up with industry trends, proposed regulations, and new products and services. For example, they learn about social trading through sites like InvestinGoal so they can glean information from other people to help them make decisions instead of relying on formal reports that come out after the market has already adjusted.
The most successful traders are pragmatic. They aren’t hunting for the one mythical perfect deal that will never occur. Conversely, they won’t fall for scams and hype that are proposed to people seeking those unrealistic deals. They work the market, trade after trade, slowly growing their wealth. This is the principle behind the book “The Millionaire Next Door”. Most of the wealthy didn’t inherit it, win the lottery, or earn a million dollars in one year with a book deal or sports contract. They built their wealth using realistic business plans.
Through a mix of pragmatism, self-discipline, and education, successful traders work a proven system to grow their money or their business over time. So, if you feel you have these qualities or can develop them, you’ll be halfway to your goal of being a successful trader.