Trading Psychology: 5 Core Traits of Successful Traders

Traders feel equipped as they familiarize themselves the inner workings of stocks and market fundamentals. They may understand the benefits and limitations of technical analysis and can dissect patterns, trading volume and make sense of price movements but it is not enough to become a successful trader.

Traders find themselves in high-intensity situations, darting in and out of stocks, forced to make quick decisions. To get through it successfully, they need to preserve the presence of mind, maintain composure while following strategy.

But what does it take for a trader to have the emotional strength not to concern themselves with the day to day losses and focus on long-term profitability and longevity? How do they maintain their objectivity towards the market and not allow their emotions to consume them?

Traders need to educate themselves in the psychology behind successful trading to contain the emotions that may hurt their trading ability. Here are the 5 traits that traders attribute to their success:

1. Passion with discipline

The “real” traders are the ones that are passionate about the art of trading. Yes, they trade for the money but more than anything, they trade for the emotional and intellectual challenges that the trading market provides them with. For them, there is no option to quit just because the losses were great. They accept the mental challenges of trading and are fired up by it.

But for passion to thrive, there needs to be discipline. While passion is a positive behavior, too much of it without limits can negatively affect a trader’s strategy. Discipline in trading means sticking to your strategy through all its ups and down in the same way that you as a trader have committed to trading as a profession.

2. Confidence and Courage

Successful traders are confident in their abilities and trust themselves to make trading decisions based on their training and experiences. And even when they are uncertain of the outcome, they maintain assurance to see it through.

You can be exceptional at analyzing the market, but without the confidence, you cannot find the courage to approach the trading markets effectively.  

To gain confidence and courage, a good trader practices discipline. They collect knowledge and continuously learn in order grow. The more experience they get, the less consumed they become by anxiety and fear.

3. Patience with Persistence

If you are naturally impatient, trading may not be for you. However, trading can be learned, and it can be mastered.  

Traders need to exhibit patience when entering a trade. They must maintain that patience while a trade develops and let the process go to work. And if they are ever tempted to exit a trade prematurely, they must step away and reassess the reasons why they initially set those stops and targets.

Traders need to be patient to know when to sell a position. Even when despite following the rules, the price of their stock barely moves. They now have to go back and re-examine their analysis of the trade. Should they avoid the stock at this price or sell it immediately? Should they hold their position?

Trading requires a great deal of patience coupled with persistence as you listen to the market and trust your judgment. You have to sit on the sidelines and wait for a trend to develop. Trading against the trend happens when you let your impatience overcome you.

Your patience is required as you to wait for the right trades; it is equally required of you to commit to trades that aren’t working. Your persistence will reward you by presenting you with the optimal time to sell. Your patience gives you the mental strength to wait it out; it’s your persistence that helps you commit and see it through.

4. The emotional strength to conquer fear

To feel some level of fear is inevitable for all traders at some point. You are after all, passionate about you do and fear occurs when anything threatens something that is important to you. The problem with fear is not the emotion itself but the way that traders may overreact to it.

Fear has caused many traders to act on impulse, liquidating their holdings avoiding any more risks. As the fear level increases, traders become more cautious to the point of irrational decisions, desperate not to make a mistake and ironically, making more bad choices they will regret later on.

What are traders so afraid of?

They are scared of losing. The fear of loss will often hold them back from taking action, losing the ability to execute their strategy. All traders will feel fear at some point, but successful traders know how to manage their fears. A trader in fear will either fight, freeze, or flee.

They fear missing out, and this fear can also be perceived as greed. As trends progress, those who were initially skeptical suddenly find themselves convinced that there will be gains ahead. Traders don’t act based on their need to own the stock but rather that it is going up without them onboard.

Successful traders who have control of their emotions can accept that they will feel fear many times over. The difference is that they will not let it consume them. The fear of loss makes them fight harder, think straight, and react smart. The fear of missing out does not allow them to fall victim to “herd mentality” and keeps them committed to their strategy.

5. Ability to keep greed under control

Much like fear, greed is natural for traders. And like fear, too much of it and allowing it to control you will inevitably lead to failure.

There can be devastating outcomes for traders whose greed causes them to hang on to winning positions for too long in their desire to get every last trick. Traders acting on greed become reckless and will lead them to financial ruin. They are blinded to the point of over-trading or risking too high of a trading percentage.

Greed is difficult to control. Unfortunately, many traders don’t realize they were driven by it until it is too late and already crushed by massive losses.

Anyone can attempt to become a trader, but certainly, not everyone goes on to becoming a successful one. This is because there are core traits that every successful trader must possess not just to trade successfully today but in the long-run. Understanding the psychology of trading and the characteristics that are required for longevity is critical for every trader.

The experts at Live Traders know what it takes to become a successful trader. For advice on the fundamentals of trading and the psychology behind trading success, contact them here.

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