Regardless of the type of trader (bank, fund, individual), what strategies they use (technical analysis, fundamentals), what markets they trade, and over which time horizon, there are a number of key character traits that all successful traders have in common. These are key factors that are easy to miss when you are beginning your journey as a trader, when your focus is on making money, or maybe just not losing it.
Although there are numerous reports and articles on what to avoid as a newbie trader, or “top tips” to being successful, we would suggest that should look to shift your psychological biases closer to the following personality traits. Then, your chances of success in the world of Forex, Contract for Difference trading, spread betting or broader investing, are going to be much higher! Here are a some of the vital characteristics and qualities that successful traders share.
1. An enthusiasm for financial markets
For new traders, a common reason to start CFD or Forex trading is purely to make money. With online trading becoming more accessible, it has become very attractive for these traders to make money from the comfort of their own home. This can be an issue, as they do not love the markets, but just the money it can provide them.
Despite what internet ads and website forums may say, being successful in the financial markets is far from easy. A level of education is needed to consistently make money in the markets, and as with everything, it is much easier to learn if you love the subject. Traders that read a simple book on trading, choose to take a quick look at their broker’s introduction online lectures or possibly rely on some of the more widespread technical signals are unlikely to succeed in CFD, Forex or any other type of trading or investing.
Love for learning about the markets is vital for successful traders. They consume all of the webinars, tutorials and video guide their broker affords them, whilst constantly reading trading books to satisfy their enthusiasm for the subject.
They study all the technical indicators they plan. They also learn about fundamental analysis, whilst being glued to economic news feeds, processing new research and assessing new trading techniques, day in day out. This obsession with and love for the markets is how traders become successful, as much like many other undertakings, trading has a steep learning curve.
2. A tested trading strategy
Expert traders appreciate how important it is to detach their emotions from their trading and always trust in recording the results of their trading strategies. This gives them an advantage in the marketplace.
Even discretionary traders have precise entrance, exit and risk managing systems, even if they decide to supersede their signals every so often.
Are you logging all your trades and back testing your strategy? Has this process shown that your strategy is profitable in the longer-term? You should record your trade entry, stop los, trade exit and risk management systems, such that they are easy to understand and apply.
3. A positive mental attitude and approach
A positive mental outlook is key for successful trading. Techniques such as S.M.A.R.T goals, Neuro-Linguistic Programming (NLP) and Creative Visualisation have a shared idea, which is they get you thinking about the optimistic results.
Skilled traders have a target-based mindset and one must question yourself, what is preventing you from being a skilled, self-confident trader. If you have envisaged, noted down and can asses your goals, then it you should be positive about the future outcomes.
Effective traders need patience, self-control, fortitude and clarity. They must learn to trust their analysis by following their strategy. Whilst under pressure, they must keep calm and need to acknowledge that things will occasionally go wrong, no matter what they do.
A correct mindset allows successful traders to wait out unfavourable market conditions, maintain funds in reserve while distributing risk sensibly, even in the most active markets. It allows them to stay focused on their methods and goals. This correct mindset lets them keep to their strategy of profit-taking, the suitable kinds of trades for them and their intended entry and exit points, despite what else has occurred. In contrast an inexperienced trader often exhibits the frantic conduct that many associate with the strenuous realm of trading.
The idea of the positive overall mindset is closely linked to the money mindset. A short-term series of losses does not worry those with a solid money mindset. They are confident enough to trust there is profits to make on the markets in the long-term, crucially that they do not have to make it all in one go. This allows successful traders the self-control that they require to implement effective risk management schemes.
They resist the attraction of using all their capital and leverage in every trade. Successful traders have the discipline to invest carefully and profit-take moderately, assured by the understanding that there will be more profits to be made in future deals.
Many trading strategies and techniques can have their ‘golden time, where regularly seem to return profits. However, lots of less successful and inexperienced traders fail to have the patience to give their strategies the opportunity to make much larger profits.
Expert traders recognise that markets experience volatile, trending and range bound phases and if their trading strategies aren’t effective right now, it may be because of unfavourable market conditions, as opposed to the trading system being broken.
You may just have to be patient, ride the drawdown in your account, whilst allocating a smaller amount of risk accordingly, in order to be prepared when profit opportunities arise in the future.
5. Enough capital
The phrase you must spend money to make money is often thrown around in the financial community. There are, however, still many new traders who enter the realm of online trading with low levels of capital. They are under the impression that CFD and Forex trading are not hard to learn and do not require high levels of capital. Online brokers offer a significant amount of leverage, even if it is your first time trading, and CFD trading allows you to use each and every penny of that leverage to make money. A minimum deposit prerequisite of just £100 can be offered by some brokers.
In reality, the approach of a small account and high leverage will likely not be very successful with CFD or Forex trading. A start can be made with a little deposit, but a larger one is better. No first time trader ought to begin trading with maximum leverage, no matter if their broker affords them this opportunity, which they often do.
If you learn trading techniques, study strategies and dedicate a significant amount of time to trading with a demo account, then it will quickly be clear that effective traders must be content with tactical loss-taking. Traders with inadequate capital often have issues with this, for obvious reasons. They are often bad at profit-taking as they are usually desperate to make profits to enlarge their account size.
Here you can read about different forex trading platforms and if they offer demo accounts.
6. Support networks
Successful individuals generally have a solid support network behind them and likewise a trader should have a similar setup. Traders are often familiar with how isolating the profession can be, which makes it crucial to have an understanding spouse, parent, friend or significant other. A trading coach or tutor can also be central to provide that support, not only when times are bad but when they are good as well.
What makes a successful trader? A summary
Whether trading Forex or CFDs the above character traits of successful traders should be aspired to. A clear vision for you trading with a defined strategy, patience, appropriate capital and funds, a positive mental approach, a dependable support network and a love for markets, all are essential to a successful career in trading.
Interesting related article: “What is a trader?”