12 Characteristics of Great Traders

by Jonathan Adams

At some point all successful forex traders develop a set of characteristics that set them apart from losing traders. Their success depends on being mentally prepared and flexible so that they may take advantage of any market environment. The following are 12 characteristics, in no particular order, which we have found common to successful traders. Try and apply these characteristics to your own trading.

Characteristic #1: Great Traders Think for Themselves
Great traders think for themselves. They develop an opinion and formulate a trading strategy and will not change their opinion until they are proven wrong by the market or the market gives them new information that forces them to change with the market. They adapt and react to whatever the market tells them and listen only to the people that have influence over market prices such as the central bankers.

Great traders always hold themselves accountable for their own decisions regardless of the outcome. It’s absolutely crazy how many people, or so called experts, are willing to give away their opinions about the markets. Turn on the television and watch a financial news network for a couple minutes and try to count how many times someone tells you their opinion about the market direction or where you should park your money. If what they know is so valuable then why would they give it away for free for the rest of the world to profit from? Maybe you should question if what they are telling you any value to it or if there is a hidden agenda.

Characteristic #2: Great Traders Adapt To the Market
Great traders adapt their trading tactics to whatever the current market environment is. The markets are constantly changing. New technologies are being created daily that cause the speed of information to increase. In recent years we have seen an amazing increase in the volatility of virtually all global financial markets. 10 years from now the markets will likely be even more volatile and thus all traders must learn to adapt or lose their money to someone else who has.

With fast changing markets and increased volatility, those who are prepared can profit tremendously by being able to identify opportunity and act quickly. Great traders have learned to adapt their trading style to coexist with the markets constantly changing personality. Great forex traders listen to what the central banks are telling them, watch how the market reacts, and make profitable trades based on those inputs.

It doesn’t matter if the markets are going up, down or sideways. Great traders will always have a game plan to navigate their way through whatever the market throws at them and still make consistent profits. All you need is to have trading tactics for up, down and sideways markets and then be able to identify when each type of market is likely to occur.

Characteristic #3: Great Traders Have a Business Plan
Great traders always keep a business plan. They know that trading is just like any other business on the planet and you must have a plan for your business to succeed. Your business plan is meant to keep you on track so that you are able to analyse the results you are getting and see if your plan is working. More importantly this helps you make improvements and changes that will make the plan more profitable in the future.

Any business plan should consist of a set of rules and guidelines that are designed to keep the trader from making ‘seat of the pants’ or “shoot from the hip” type decisions. This type of trading generally leads to failure and disappointment and once this type of bad habit has been formed it can be very difficult to break.

Being able to track and analyze your trading results is an absolutely essential part of your trading plan. You should be able to determine what aspects of it need to be changed to produce better and more profitable results for you.

If you don’t track you trading then it will be very difficult to understand, with any degree of certainty, what parts of your business plan are working and which are not. When you track your results you can find common flaws and make an effort to fix them. Repeatedly testing and fixing is the essence of any solid business plan.

Some general questions you will want to answer in your trading business plan are:

  • How much preparation will you devote before each trading day? What will it entail?
  • What are the exact techniques and strategies you will use?
  • What expenses will you have?
  • What is the maximum amount of risk you are willing to take per position and per day?
  • What are your goals and objectives?
  • How will you track your trading results and how often will you do that?

A comprehensive business or trading plan will answer all these questions and much more but the most important aspect of your business plan should be its flexibility to change and adapt to the results you are getting in an effort to produce even better results. A well thought out, carefully constructed plan will create both discipline and confidence.

Characteristic #4: Great Traders Have Mastered Their Emotions
Human emotions are and have always been the main driving force behind the market’s price action. Great traders trade like machines and never react emotionally to what the market is doing to their positions whether it’s good or bad. The traders that react emotionally to the markets are at the mercy of an irrational behaviour that is not productive in the financial arena.

Fear and greed dominate the market place and great traders have developed systems that help them identify profit opportunities when other traders are reacting with extreme emotion. Fear and greed is what makes a trader grab at a profit way too early and not take a loss when he is supposed to.

Great traders trade their game plan and that’s it! They don’t let anything else influence their trading decisions. They know that they will always find a way to make money every day at the expense of other traders that can’t control their emotions.

Great traders know themselves and their limitations and don’t put themselves in a situation where they might let their ego or other emotions take control. They focus on what can go wrong with a trade and control their risks before thinking about their profits. They do this objectively without emotion and it’s their trade plan that gives them confidence to stick to it when a trade is not working out as they thought it should.

Characteristic #5: Great Traders Know How to Use Their Trading Tools
Great traders know how to use the tools they have set up for trading. They know their charting platforms, news feeds, trading software and anything else they rely on to make their trade decisions in and out. They know their tools so well that in any situation where they are under pressure and lightning speed is required they will have no hesitation in reacting quickly and precisely.

Great traders have mastered their order methodologies for buying, selling, taking a stop or profit. The best traders exert almost no effort using their tools because they have spent time and experienced many different market situations with them. They probably know their trading tools better than they know their spouse. As silly as it sounds, to some degree trading is also a physical skill. When things are moving fast your keyboard and mouse skills may be the difference between making money or taking a beating.

Characteristic #6: Great Traders Educate Themselves
Every trader needs a proper education about the markets before they can become truly successful. They need to create a trading methodology to follow religiously and won’t be able to do that without understanding how the markets function. If you don’t know what a bid or an offer is you will probably want to figure that out before committing your capital to the markets seeing as its one of the most elementary aspects of trading you will need to know to place a trade.

The best traders read everything they can get their hands on, watch dozens of videos, talk to other successful traders, take courses and anything else they can think of that might help them become more successful. They keep an open mind to new information as long as it makes sense. For them, the search for more knowledge is a passion and obsession that is a chance to find a new, more profitable element for their trading plan. Great traders know that education is a continuous process of self-improvement and remain open minded to new opportunities.

Characteristic #7: Great Traders Have Extensive Market Experience
Great traders have an extensive amount of market experience in all different kinds of market environments. Most people that give trading a try approach it as a get rich quick scheme or something that is used for entertainment.

They think that in a very short period of time and almost no effort or understanding of an extremely complex business, they can turn a couple thousand dollars into millions. This belief, quite frankly, is absolutely ridiculous. No wonder so many new traders fail and lose their money to smarter traders so quickly.

It has been said that there is no more difficult business than the business of trading. Many prior ultra-successful entrepreneurs who try their hand at trading fail even though they were extremely successful in other businesses. This may be because trading involves extreme mental and emotional stresses that require intense discipline. The speed that money can be made or lost puts great amounts of pressure on even the calmest of minds.

Whether you like it or not, when you commit your money you commit your emotions and it will take time and experience to deal with these emotions in the most effective manner possible. The easiest way to help with emotional pressures is to have confidence in your well thought out trading plan. This confidence will keep you at ease when in a trade because you will be sure that you did your best to put the odds in your favor before you placed the trade. Your trade plan is your war map that will tell you what to do in any market situation.

There are theories that it can take as much as 10,000 hours of pure experience and education to become an expert in any endeavour that you choose. Now, it is debatable exactly how much time it will take for each person to become successful in the forex market but from our experiences it can be as little as a few months to several years before true success is attained. For many traders, they only find success after they have found every conceivable way to lose first. Some people get lucky and hit a few home runs straight out of the gate but this kind of luck is usually short lived.

Remember, it’s the quality of experience that is the key to becoming a great success in trading, not the quantity of experience. We are confident that you can become a consistently profitable trader in just a few short months if you focus on doing the things that stack the odds in your favor and keep you out of trouble. In forex that is following the central banks and keeping an eye on sentiment through the news feed. For those die hard technicians out there it might be hard to hear but the forex market doesn’t move because of a bunch of squiggly lines on a chart.

Characteristic #8: Great Traders Don’t Worry About Their Profit & Loss
Great traders don’t worry about what the profit and loss column says on their trading platform. They focus on the trade and the trade management rather than the profit or loss. They know that focusing on the dollars rather than the price pattern can lead them down a slippery road filled with emotional and irrational trading decisions. Many traders do not have their profit and loss blotter open for the fear that if they see the profits or losses it could affect their sound judgement.

Professional traders view each trade unemotionally and focus on getting the most out of the market in accordance with their well thought out trading plan. They don’t focus on how the money being made or lost is the grocery bill or mortgage payment as they know that type of thinking will cloud their technical objectivity.

Characteristic #9: Great Traders Keep a Trading Journal
Great traders keep a detailed trading journal. Most other traders don’t keep a trading journal, but then again, most other traders don’t make any money trading either.

A trading journal can be many things but it is important to keep a log of how you felt before, during and after a trade:

  • Were you emotional during the trade?
  • Did that emotion effect your trading judgement and decisions?
  • Did you grab at a profit too early or not take a loss early enough?
  • How did that make you feel when you didn’t follow your plan?
  • Did you manage your trade correctly or did you let your emotions get the better of you?

You need to keep track of your emotions in order to better understand what drives you to make a trading decision. Use your journal to find your psychological demons and develop a plan to rid yourself of them by systematically eliminating them.

Characteristic #10: Great Traders Are Great Money Managers
Great traders are great managers of their money. They have a healthy respect for the risks involved in trading and have mapped out precise money management rules that they use with their trading strategies. They are ruthless about losses and cut them quickly while at the same time let their profits run far enough to pay for any of the inevitable losses.

Great traders usually risk very small amounts of money per position and have defined this amount in their trading plan. Generally, they risk less than 2% of their account per trade. The idea is to risk a small enough amount today so that if you take a loss on a trade today you can still trade tomorrow.

If you blow out your account in one day or one trade it’s going to be hard to pick up and trade tomorrow since there won’t be any money left, not to mention the severe emotional damage that comes with that kind of behaviour.

Characteristic #11: Great Traders Are Comfortable With Risk and Uncertainty
Great traders are completely comfortable with taking risks. They may not like having a trading loss but they know that losses will always be a part of the game. Before they ever get into a trade they have already accepted the possibility of taking the maximum amount of loss as outlined in their trade management plan. They know that the possibility of losing money on any one trade is always there and accept this fact unemotionally.

Great traders are comfortable placing a trade with information that does not produce 100% perfect results because their extensive experiences with the market tells them that 100% predictability is not possible. They know they have done all they could to put the odds in their favour. This is where many new traders have a very difficult time; they can’t accept the possibility of taking a loss and inevitably wind up sabotaging their own trading performance.

Characteristic #12: Great Traders Always Accept Responsibility for Their Actions
Great traders accept personal responsibility for everything they do in the markets. Whether they make a profit or take a loss the ultimate decision was made by them and they accept full responsibility for any outcome, good or bad. These traders never let anything else interfere with their decision making process. Their level of focus and objectivity is extremely high.

Many beginning traders lack the confidence that comes with experience to make their own trading decisions. These novices rely on others to guide them. Some even prefer to rely on others so that they will never have to accept personal responsibility for their own trades and therefore will always have someone else to blame for their losses.

Novices feel more comfortable when they know there will be someone else to blame while they are in a trade.
Needless to say this isn’t the way to create great amounts of profits from the markets. Make your own decisions and accept that the final outcome is a result of your own decisions.

So despite the minefields out there, remember you are less than 100 trades away from truly unlocking the attractive bonuses and the trading role with your name all over it.

Written by Miles Eakers Co-Founder at Chancery Lane Traders

For more information please visit www.chancerylanetraders.com or email [email protected]

This article is for information purposes only.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

Related News

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Know more