Traders have a certain mindset and they tend to share common characteristics on the trading floor. These personality traits carry over into their real lives. Do you recognize any of these behavioral paradigms in yourself?
#1 Mastery of one’s emotions
Trading stress can reach insurmountable levels. The traders who excel in this type of environment are masters at working well under pressure. Perhaps it is that they came to the game with this mindset, but invariably the ability to stay calm under pressure is only honed further by the myriad of stresses assaulting them on a daily basis.
Another important part of this is the limit setting. Great traders know when to step away from the trading floor because their emotions are potentially going to get the best of them. Self-control is likely the most important aspect of a trader’s psyche. It prevents situations from getting out of hand when things don’t go right and also helps avoid becoming complacent or cocky when things do go your way.
“Self-control – what lies in our power to do, it lies in our power not to do.” – Aristotle
#2 Ability to identify and act on opportunities
The ability to sense opportunity in a split second is endemic to most successful traders. Most traders are very picky about what they will and will not trade. For them, depth of knowledge is more important than breadth. They know the course and the game they are playing – to a meticulous level of detail. For this reason, when opportunities arise they can sense them easily and are prepared to take action.
“A wise man will make more opportunities than he finds.”- Francis Bacon
#3 Always thinking in terms of risk and reward
Perhaps traders didn’t come to the game with this skill, but as they delve further into their craft it becomes second nature to automatically assess the risk-reward profile of any pending action.
Risk management is an important part of this paradigm. Take two traders. One sets a daily limit for the maximum loss they are willing to take before they step away. The other one is just out to maximize gains without any sense for limiting the downside risk. Given that many trades are leveraged, in a fast-moving market, losses can multiply pretty quickly. Which trader do you think is going to fare better over the long term?
“Test fast, fail fast, adjust fast.” — Tom Peters
#4 Quick and decisive decision making
In a complicated and overwhelming world, the ability to make real-time decisions that make sense is a rare skill. Traders tend to be very clear thinkers who are able to organize their thoughts. They tend to see things in a binary way – that way there is little confusion about the right way to go. Operating in a fast-paced environment leads many traders to rely strongly on their instincts – which never lie.
“More is lost by indecision than wrong decision.” – Marcus Tullius Cicero.
#5 Knowing your own strengths and weaknesses (and dealing from your strengths)
A truly skilled trader understands what he or she does best, and is able to transfer that knowledge into mastery. It also takes a great deal of acumen to gain control of your weaknesses and minimize the risks they pose.
For this reason, many traders have a highly developed trading style and it fits them like a glove. Traders are not the type to be a jack of all trades. To them, branching out brings the risk of trying to fit themselves into a new way of doing something and more often than not is not viewed as worth it.
“Everything should be made a simple as possible, but not simpler.” -Einstein.
#6 Developing a thick skin
The trader’s motto is to never look back as every day, for better or for worse, brings a clean slate. Seeing each day as independent from the one before leads to incredibly thick skin. Traders tend to look at wins and losses in a very unemotional way because they know that the next day brings just as many opportunities as the one before. The best traders analyze each trade, whether or not they worked out, for clues about what they could do better next time.
“Do not fear mistakes. There are none.” — Miles Davis
