You often hear people say that being a day trader isn’t for the faint of heart. Nevertheless, everyone seems to want to take a shot. There’s plenty of money to be made and there’s nothing like knowing you excel at something few people even understand.
But what does it take to be a great trader? You’ll need grit and determination. And you’d better be fearless and driven as well.
Can We Move Beyond the Cliches?
But saying you need to be smart and determined to be a day trader is sort of like saying you need oxygen to breathe. Let’s delve a bit deeper, shall we, into what it really takes to make it in the fast-paced, high-stakes world of day trading.
Here are six traits that most, if not all, successful day traders share. If you find yourself lacking in any one of these areas, it might give you something to think about.
Like we said above, day trading is not for the timid. One trait all the greats have in common is their sheer, unadulterated bravery. Every day, they’re out there taking risks with money that would make anyone else suffer constant panic attacks if they attempted to shoulder the same weighty uncertainties.
But before you go adopting a full-on ‘devil-may-care’ attitude with daily decisions at your job, hear this: there’s a world of difference between courage and recklessness.
The great traders of our times have taken risks nobody else dared to take. But behind those daring decisions stands a lifetime of learning and studying. There’s a vast knowledge of business behind every trading decision they make. There are also endless late nights they spent at a desk eating biscuits and take out as they studied corporate records, financial statements, corporate minutes and earnings reports.
In other words, it takes quite a bit of self sacrifice and hard work to get to a point where you can actually be brave on the floor. Great traders understand the risk they’re taking and they do everything in their power to mitigate that risk. They plow on ahead in spite of those risks, and that’s where the courage comes in.
Ask any seasoned day trader about how they were able to stay in the game, and nine out of ten will mention something related to persistence. The ability to continue forging ahead after being pummeled by a series of consistently bad trades is essential, they’ll tell you.
Because every trader has a few bad moves under their belt.
Good traders know that to be successful, they do have to adopt a long-term perspective. Pursuing profits is always the goal, but with day trading it’s understandably easy to get caught up in the daily wins and losses (the nature of the game!).
But in the long run, even day traders know that it’s the long-term record that counts, not a string of losses. They persevere, and they eventually come out winners.
This trait goes by many names but we thought ‘enthusiasm’ covered it nicely. Traders have to be able to focus. Every trader has their own strategy and these vary from market to market. Whether you take a one market approach and apply varying techniques, or you apply your single strategy to a number of markets, you’ll need to stay focused on the method you’ve chosen.
In any business, the ability to focus hinges on your enthusiasm. When you’re committed to a vision or an idea, or in this case a well-researched approach to trading, there’s a certain energy that grows from deep within.
And when you’re revved up by this energy, pretty much nothing can stop you. It’s called ‘loving what you do’. People who love what they do tend to excel at their jobs.
Obviously, we’re not saying here that you need to pray to a deity to become a good trader. Rather, this is about the ability to handle uncertainty.
If you don’t already, find a way to handle large amounts of uncertainty in your trading situations. You probably already know that trading outcomes are never black and white. You live in a world of gray because trading is not science. Waiting until something is a sure bet means you will never make money because the opportunity for profit will have disappeared long ago.
You’ll need to withstand the precarious position of not knowing how your decisions will pan out, with nobody to hold your hand. So, along with faith in your methods you’d better have faith in yourself. A strong sense of self is an absolute must, unless you enjoy suffering the soul-crushing sensation of constant fear and worry that you’ve made ghastly mistakes with other people’s money.
Trading, especially day trading, is super competitive. To maintain their edge, the best traders are constantly educating themselves. They read articles about things like yield curve analysis. They study the money markets. They know about banking. They even explore legal issues and industry news.
It’s nearly impossible to continually absorb new knowledge without possessing at least a modicum of curiosity. Scratch the surface of any successful trader (or any successful leader, for that matter) and you’ll find a burning desire to learn.
Finally, we’ve hinted at the dedication and hard work it takes to become a successful trader. Some of the top traders in the world today have backgrounds in the military. What do soldiers have in common with traders? Discipline.
It takes discipline to balance the stress of making high-stakes money decisions with the pressure of delivering consistent returns by making calculated risks. Does that about sum it up?
It also takes discipline to complete the volumes of research it takes to make good decisions in this business. It also takes discipline to eat right, get enough exercise, and try to have a social life. You’ll need a proper life-work balance to keep going. Not having discipline in your life means everything—and we mean everything will eventually come to naught.
The Final Word
If there’s a single thread that runs through the web of successful traders, it’s these six traits. If you’re bound to stay in the game, there are a lot of qualifications of a good trader, but these six characteristics should keep you well ahead of the pack.