One of the most challenging aspects that new aspiring traders face, and some old traders as well, is what fuels their motivation to trade the markets. It’s often said that for anyone to achieve any significant success in any undertaking, they’ve got to envision it first in their minds.
Traders aspiring to achieve long-term success and the financial freedom that comes with making money consistently on their terms and time should follow and mimic the mental traits, attitudes, belief systems, and trading approaches of successful traders and investors that have walked before them.
Let’s indulge in some of the main thought processes, attitudes, and processes that successful traders adopt in their everyday trading lives.
They Value & Pursue Performance, Not Money
One of the biggest pitfalls for traders in general that significantly contribute to their lack of success in this business is their focus so much on making money, rather than on their performance. This is the hallmark difference between highly successful traders and novice traders. Successful traders understand that if they can track and improve their performance, then the money will take care of itself. They value their actual trading performance thereby developing proper trading habits that help their performance to remain positive progressively. When you focus on only making money, your mind shifts from important elements of trading that affect your trading performance such as having and following a robust trading plan, not risking too much per trade, being patient with your trades to work out, not moving your stop losses further, and so forth.
In the words of one of the most successful traders, “The goal of a successful trader is to make the best trades. Money is secondary.” – Alexander Elder
They Think Long-term and Act Long-term
Whereas most traders are blinded by their unquenchable desire to make money quickly from the markets, successful traders understand that trading is a long-term game. They are masters of their own game and measure their performance not based on weekly or monthly performance, but over quarters and years. They approach trading professionally as a business, not a get-rich-quick option. Successful traders have a rich experience trading the markets over a long time, something new aspiring traders lack.
It’s impossible to measure your performance over one week, or one month, let alone one year. You have to change your mindset and look at the bigger picture. You’re in this business for the long term, so your goal as a trader must remain to improve your performance every day, learning from your mistakes. Successful traders have been through all the phases, good & bad, and understand that they cannot make money every week, or every month. They understand that they will have a bad month or a bad quarter. Sometimes they might go for a whole month without trading if the markets don’t fit their analysis approach. They also know that they’ll make up for the bad month, and end up positive by the close of the year.
To keep them in a flow state when not trading, successful traders channel their energy towards other projects such as reading, writing, educating new traders, or adopting personal projects. This way, they have a life away from the market charts. They have mastered the discipline of following the markets and staying away from the markets when their trading systems do not align with the prevailing market conditions. They think long-term and act long-term.
They Don’t Care About Being Right
As human beings, we have such an insatiable desire to be right, whether in our opinions, views, or choices. The irony is that we have very little control over what will happen to us tomorrow, or in the next three years. What we can do in the meantime is use our skills and resources to set up our paths right today.
Successful traders not only understand that achieving success in the game of trading has nothing to do with being right in all their trades but also know that it’s futile to try to be right in all their trades.
Whereas new traders are obsessing with their need to be right with the outcomes of their trades, successful traders’ main driving goal is to make as much money as possible in their winning trades and cut their losses short in their losing trades. Risk to reward. This is the thin line that separates struggling traders from successful traders. Successful traders are totally fine with taking a loss at any time. Their mindset is that their current trade can turn into a loss, regardless of how accurate their analysis is portrayed. They don’t avoid losses. They manage losses and keep them to the minimum using stop loss in all their trades. This is their ‘secret’ to becoming a successful trader. They only need to win 40-50% of their trades, and they’re set to achieve their profit targets.
They are Masters of Capital Preservation
Unlike in most other professions where doing more means earning more, in trading, doing less is more. It can be a challenge for new traders that are coming from such a set-up where you need to put in more hours to make more money or had to report to an 8 to 5 job. It calls for a shift in your trading mindset for those coming from such a background. With trading, it’s not about making more trades, it’s about picking up a few quality set-ups that fit your trading system or analysis.
Successful traders understand the golden art of doing nothing and sitting on their hands when the markets don’t offer them clear tradable setups or signals. They understand that they have to preserve their capital to catch the big moves when they appear. Most new aspiring traders struggle because they’re constantly trying to force trades every other minute, thereby losing their small capital. So when good opportunities appear in the markets, they’ve already lost the ammunition in their chamber to kill the prey.
Successful traders think like hunters. Like a lion, they lie low and wait patiently for easy prey to appear, and only when their odds of winning are high do they charge and pin down their prey. Patience and precision are the pillars of successful traders. This way, they’re masters of preserving their capital because they know that great setups will appear eventually, and they’ll be ready to jump in when they do. Jim Rogers summed it up well here…
“One of the best rules anybody can learn about investing is to do nothing, absolutely nothing unless there is something to do. Most people – not that I’m better than most people – always have to be playing; they always have to be doing something. They make a big play and say, “Boy, am I smart, I just tripled my money.” Then they rush out and have to do something else with that money. They can’t just sit there and wait for something new to develop.” – Jim Rogers
Reflect upon these traits and mindsets of successful traders. Self-examine yourself, and your approach to trading. Where do you want to be two years from now as far as your trading performance is concerned? Adopt this mindset and these habits of successful traders, and you’ll have set your whole life on a new path to becoming a successful trader two to three years from today. Do anything and everything that you have to do to achieve this. Seek mentorship, subscribe to a credible trading course, and constantly learn from your mistakes. Let’s meet on the other side.