CHAPTER 7

Common Traits of Successful Traders

Assess and think about the following traits. These may not apply to you, but they are important to note.

Basic Background

The following does not mean that if you do not meet these criteria, you cannot be a trader. These are simply observations.

Trait	Details
Age	25 and 35 years of age.
Marital status	Married or divorced, but seldom a bachelor.
Appearance	Dresses for comfort, with no ties. They have short hair and frequently have beards and moustaches.
Origins	Poor to middle-class homes: Poor homes drive some children to achieve more than their parents, while many wealthy move into family businesses.
Childhood	Absent parents can create an environment where children learn to live without a safety net, converted to entrepreneurial drive and perseverance.
Education	Many entrepreneurs are university dropouts, but driven not to disappoint those important to them (spouse, parents, and friends).
Other traits	Singly minded, focused, courageous, creative, insightful, and happy.

Personality Traits

Trait 1: Confidence and Decisiveness

One of the most difficult traits to teach traders is one of confidence. I can teach you to be mechanical in your approach to trading, even build a staggering level of knowledge, but to be truly successful as a trader, you need to be able to absorb all teachings, skill, and experience and implement entry and exit strategies without hesitation and with the confidence that he or she has done the right thing.

As such, stated differently, it is this level of confidence that provides traders with power to make effective and decisive trading decisions. In fact, the jump from novice to professional trader will only happen when you can confidently learn from mistakes and have the courage to believe in your own convictions.

Looking at this trait from a negative stance: Lack or nil confidence tends to create doubt and indecision which, in turn, results in lack of timing trades, missed opportunities, and losses. Indecision really means that you don’t truly believe in your skills.

Trait 2: Positive Attitude

It is a truism that attitude improves with your experience and skills level. This, however, only takes place if you have developed a disciplined no-nonsense trading style that executes trades according to your predetermined and developed strategy. If you cannot execute your own signals, on both entry and exit signals, it takes just one mistake to give all those hard-earned profits back to the market.

It is an obvious statement to make, but belief in yourself and your trading skills is only built from being able to continuously achieve profits from the execution of your trading rules.

Trait 3: Patience

This statement cannot be made enough: You don’t have to trade every day. Your first question when you enter the trading day is not what you should trade, buy should you trade. Traders with patience and the discipline to follow their own trading rules know when to buy, sell, or stay out of the market. Losing because you are pressured to trade will ultimately end up with you losing your capital.

If you find that you are not conducting enough trades a week, then reassess your rules as they may be too severe or restrictive. These are your rules, so change them. Just don’t go in the opposite direction and make the rules to lose.

Trait 4: Discipline, Discipline, and More Discipline

This is the most critical trait and is discussed through these three volumes.

Simply stated, to be successful as a trader, be disciplined in all your stock trading activities, from research, following-up on portfolio management, ensuring that your capital is secured, assess and reassess technical triggers, and continuously improve your knowledge of international exchanges, markets, and industries.

Trait 5: Be Passionate

It has been stated that people with passion love their work, don’t look at their watches for the end of a work day, or are glad when weekends and public holidays arrive. Passionate people thoroughly enjoy reading charts, establishing and vigorously testing trading systems, dealing with financials, interpreting triggers, learning new strategies, and working on improving knowledge of environmental factors that affect markets.

Trait 6: Acting Without Hesitation

Successful traders use time management effectively, knowing when to accept when they are wrong, accept failure and risk. They do this, assimilate the information, and move onto the next trade.

Essentially, traders take full responsibility for their actions, successes, and failures and the risks they took on when they set up their strategies. And they do this without hesitation.

Trait 7: Take Total Responsibility

Every decision that you make is yours and yours alone.

This must become your personal mantra.

There is absolutely no other way to operate in a stock market. Always take trading action (buying or selling) only after you have conducted a corporate filter, undertaken fair value analysis and looked at technical triggers. There are those in the market that will insist that trading is 90 percent gut feel. For them this may be the case, but they also have to admit that they have been dealing in securities for many years and that “gut” feel has come with trading experience, losses, success, bull runs, and bear trends.

Let’s reiterate. The successful trader knows every action he or she is about to take, every decision he or she will make, and only he or she is responsible for that action. You will seldom meet a successful trader who is looking to blame someone else for the consequences of their trading decisions. This simply does not happen.

A Very Basic Concept

Once a trader accepts 100 percent responsibility for all actions, then he or she can learn from mistakes; noting in a trading journal the entry level, reasons for entry, and exit price. If a mistake was made, accept that you made a mistake, assess reasons for poor trading, and, more importantly, learn to not repeat those mistakes; at least, not too often.

There is not much that can be guaranteed in a stock market, but one issue is irrefutable. World famous market gurus do not blame market conditions, budget deficits, economic upheavals, political uncertainty, war on terrorism, emerging market imbalances, and technological change for making a loss in the market.

I have met traders who, after making a significant loss, have thrown their chairs against the wall, smashing expensive original paintings. However, when they have calmed down, they asked themselves:

For the independent trader, losses could result in personal insolvency and financial ruin. So, ask yourself the following questions:

Did you notice that the wording of the questions were all in the first person? Here the trader knows he or she takes total responsibility for every trade and is seeking reassurance that he or she will not break the rules again.

There’s an old saying in trading: “If you have to ask whether you should trade—you shouldn’t be trading.” If you have a system that you have tested and proven over the long run that it does outperform the market and it is a system that fits your personal goals and strategy, why would you ever have to ask for an opinion? What extra will a third-party opinion provide? In fact, it will do nothing, but confuse you in making up your mind to trade.

This does not mean ignoring analysts’ forecasts or changing market trends. It means that, if you have a trading strategy to buy only mining stocks, because that is your knowledge base and strength, then don’t buy shares in furniture companies; no matter how attractive the share price may be. Another instance would be not to ask a day trader for advice if you believe in the long-term benefits of compounding.

If you ever find yourself wanting to ask a third party about your position, do the following:

How can a trader learn to accept total responsibility?

Have a set of rules and realize that the most important point in trading is following those rules. You have to be disciplined and determined. Once you have a set of firmly established rules you will find yourself not having to follow outside opinion. In fact, successful dealers go to great lengths not to listen to outside opinion.

If the answer to the question “Did I follow my rules?” is:
YES	Smile, despite the loss. You can learn from this loss, reviewing and changing your rules. This way you will ultimately become a winner.
NO	A reprimand is in order. You cannot know whether your rules work, if you don’t follow them. You could end up making the same mistake repeatedly.

Accept total responsibility for every trade you take from today and you’ll be amazed at how easy trading ultimately becomes.

Trading Traits

Trait 1: Personalize Your Trading System

This sounds more complex than it really is.

Understand this: Every single successful trader, from every corner of the trading world, world has developed a trading methodology (some call it a system) that fits his or her personality and lifestyle. Some methodologies are developed over many years, some are extremely complex and computer generated, while some are simple, yet effective. It makes sense that a day trader would develop a system to identify patterns per hour, while long-term investors would be interested in developing systems to buy shares that are positive within 5-year up trends.

So, the ultimate methodology must be one that is developed and understood by you, and one that is effective in making profits for you. Don’t hesitate. Start developing your personal trading system today by making copious notes on what you want and, more importantly, what you don’t want. Ultimately, the way you trade must be intuitive enough to make profits—but also to avoid making loses.

More importantly, it must fit your unique personality.

The reason why many novice traders believe that such computer-based systems are better is simply because they have seeing such systems on television. In addition, during the past decade, trading companies have sprung up, marketing trading systems. Beware that such systems are expensive. Remember that these stockbroking systems are built to make thousands of deals for thousands of clients simultaneously.

Therefore, the system you need is a simple one to enable you to trade!

Here is an example:

I remember my old colleague at Global Capital, who used to, at the end of every day, say “today I made a profit, it was a great day!” Strangely, she would never say how much that profit was—or she was as happy if or she made $1 or $100,000. To her, not making a loss was her system of trading.

When asked if she would leave her trading career for another possibly more profitable one—her answer was always just a laugh. Most traders say that they cannot believe they were getting paid to do something they loved so much. So, you too could be saying similar things, but you will only be a top trader if you trade to a well-defined and personally developed system with established rules.

The question now therefore is: How do you create a system that is personally tailored to suit you? I suggest that you start with a simple set of pertinent questions.

Answer the following questions:

A Word of Warning

One of the biggest mistakes that many novice traders do is equate the need for trading funds with their ability to repay such funds. After all, if they take out a large mortgage, will they be able to repay that loan with trading profits? This belief stems from thinking that, if they can effectively emulate some famous day trader, they will get rich; hopefully quickly. Personally, I prefer to buy a share that I have analyzed thoroughly and hold it for at least 12 months. This period gives the company enough time to achieve forecasted goals and certainly enough time for at least one set of financial results to be released. This enables me to determine whether the company is, in fact, achieving its stated mission and publicized goals.

Over the past 4 years I have repeatedly proved how successful this method can be; at least, successful for clients who enjoy trading, but not too often.

If you are a novice or an unsuccessful trader then I suggest you start by asking yourself the following simple questions:

This is where the majority of novice traders do go wrong.

Many traders have no idea which styles of trading suites them, so they keep changing from one style to another, often buying into the latest fashionable software in the hope that this will change their trading results. The problem is that losses often force novice traders out of the market before they find the systems that suites them. I believe any trader who can last over 2 years in the unpredictable world of trading could go on to become a successful trader; an independent trader.

Get to work. There’s a lot of crucial knowledge to be assimilated before a trading methodology can be properly developed.

Trait 2: Plan Every Decision

There is no doubt that a novice trader will not last long in the market if he or she does not plan absolutely every trade he or she makes. As difficult as it is to believe, many new traders will buy shares in large amounts without blinking an eye and, to make matters worse, without undertaking any form of analysis. Imagine buying a house on the Internet without knowing where the property is located or how it is built?

You need to make the purchases based on logical and informed decisions, because once a trade has been made, there is no control as to where the share price will go. However, based on experience and skill, your personal trading system should have built in triggers to warn you to carry out predetermined strategies. This removes emotion out of the trading equation and should form the basis for systematic, professional, and stress-free trading.

The essence of having a plan is that it automates your trading strategy and removes the emotion out of trading. Thus, a strategy—or trading system—will set triggers to tell you at what price to buy a share and whether to sell the share if it climbs or falls.

A system of triggers will “professionalize” trading as it removes emotion. Under such conditions, the new trader does not have to have an opinion as to whether to buy a share, or panic if that share starts to fall. Even worse, greed in taking profits is just another trigger.

Trait 3: Be Thorough

I have stated this before—stock markets are ruthless and have no favorites. The trading public is as likely to hit property sectors as they are to hammer commodities. As such, there will always be some event that could scare you to sell shares you didn’t want to or some positive and momentous announcement to lure you to buy shares you had no intention of buying.

Only disciplined traders, who follow a well-designed and established plan, will survive this type of onslaught. If you are ever persuaded to trade or have to ask someone for an opinion as to whether you should buy, hold, or sell a share, then it can only be because:

The aforementioned example of buying a house without first seeing it is pertinent in highlighting how serious you should take planning your trading strategy. In the same manner as you would first investigate all aspects of the house on offer, the same amount of planning and effort should go into buying shares. After all, you may only have a small amount to trade today, but if your strategy is successful, you could be trading with much larger amounts in future.

As such, you must plan for positive, negative, and, more importantly, unforeseen events. Most of the time a trade will go your way and your plan will not have to be looked at, but what if the share suddenly rockets or falls like a stone, what should you do?

I cannot stress enough that complete discipline is crucial to succeed as a trader.

Trait 4: Skills Can Always Be Refined

It’s quite amazing that people from different walks of life believe that they can become traders overnight. When asked how long it took them to become chartered accountants, doctors, or plumbers, they seemed surprise at the question. Why do so many people expect to become market wizards within such a short period of time?

If you get to spend some time with successful traders such questions will not even surface, as you will very quickly realize just how much effort, time, determination, and planning it took to get to become traders for a living. To put it simply, being a successful stock market trader is not different to being a top lawyer, doctor, or entrepreneur.

In reality, traders go through years of trial and error and tremendous effort until they became consistent and successful traders. If you are a beginner, don’t expect to strike out and make 80-percent returns in the first year of trading. A useful way of looking at trading as a career is to say that the first 3 years are time spent at university. The stock market is the teacher and your initial accounts are your fees.

So, what does it mean to work hard at your trading? Consider the following two sections:

Only by controlling your emotions and working on your trading strategy will you avoid running into a trading catastrophes. How long does it take to become a competent trader? That depends of you and your determination to succeed.

Developing Positive Attitude

Many portfolio managers that I have spoken to over the years have said: “Nothing helps you develop a great and positive attitude than seeing your portfolio grow.” In other words, “seeing is believing.”

Here is a little trick to get a true picture of your trading performance: Keep a track record of both current (open positions) as well as trades completed (shares bought and sold). Then take the two and combine them to see how well you have performed.

Basic Portfolio Maintenance

Part 1: Overall Performance

Figures in $	Purchased Value	Current Value	% Difference
Portfolio (Open Positions)	1,010,700.00	1,528,945.00	51.28
Historic Trades (Closed Positions)	679,625.00	1,134,620.00	66.95
Trading Performance	1,690,325.00	2,663,565.00	57.58

Part 2: Current Portfolio

Company	Quantity	Cost		Current Value		%
		Per Unit	Total	Per Unit	Total	Growth	Of Portfolio
1	6,000	1975	11,8625.00	2270	136,200.00	14.82	8.91
2	5,000	2800	14,0125.00	3870	193,500.00	38.09	12.66
3	4,500	3391	15,2720.00	6375	286,875.00	87.84	18.76
4	3,000	2961	88,955.00	3330	99,900.00	12.30	6.53
5	31,000	220	68,325.00	395	122,450.00	79.22	8.01
6	2,000	1550	31,125.00	4614	92,280.00	196.48	6.04
7	400,000	26	104,125.00	45	180,000.00	72.87	11.77
8	12,000	550	66,125.00	670	80,400.00	21.59	5.26
9	13,000	725	94,375.00	893	116,090.00	23.01	7.59
10	4,000	2430	97,325.00	3000	120,000.00	23.30	7.85
11	15,000	325	48,875.00	675	101,250.00	107.16	6.62
Total			1,010,700.00		1,528,945.00	51.28	100.00

Part 3: Historic Portfolio

Figures in $	Quantity	Purchased		Current Value		%	2016
		Price	Total	Price	Total
A	7,000	2080	145,725.00	2995	209,650.00	43.87	January 1
B	2,500	7975	199,500.00	10600	265,000.00	32.83	January 21
C	170,000	29	49,425.00	50	85,000.00	71.98	January 25
D	210,000	23	48,425.00	33	69,300.00	43.11	March 10
E	160,000	39	62,525.00	75	120,000.00	91.92	April 22
F	3,300,000	3	99,125.00	8	264,000.00	166.33	June 15
G	41,000	86	35,385.00	136	55,760.00	57.58	October 22
H	39,000	101	39,515.00	169	65,910.00	66.90	November 28
Total			679,625.00		1,134,620.00	66.95

Let’s review the previous portfolio:

The portfolio is split into three parts:

Traders can use the aforementioned structure to boost their positive attitudes as traders.

It must be stressed that it does take years of experience for traders to develop the belief that they can achieve solid results over a long period. Trade with such a small risk in the early years that it hardly seems worth your while. View trading as a career and not a “get rich quick scheme.”

One client asked: “How can you do that when it’s money we are trading with?”

The only answer is: discipline.

Checking how much money you’ve made or lost each day is emotionally draining. No one can succeed like this. The percentages tell you whether you should buy more shares, sell existing shares (or reduce a holding), or whether you should just wait—according to your own rules? Top traders do not see markets as a cash box, but simply as a way of operating a business.

If emotions are potent destroyers of successful trading, then common sense dictates that to be a successful trader you must eliminate all emotion from trading. How is this done? Once again, discipline to follow the rules.

Be robotic. Be disciplined. The money will take care of itself.

Part 3, Chapter 8 highlights the critical need to manage your finances before you start to trade.