Winning traders are rare to find. The reason is because few people have the perseverance and dedication to become an independent, profitable trader in the stock market. Few people are willing to completely remake themselves and develop the traits needed to become a successful trader. After working with 1000s of students, I have found 5 common traits that all of the winning traders have. If you lack any of these traits, I can guarantee that you will not become a profitable trader in the long run.
1. Internal Locus Of Control
In the stock market, it easy to blame the algos, the hedge funds and all the other entities on Wall Street for your bad trading results. I’m sure you have heard people telling you the market is rigged. Losing traders will say they don’t have enough monitors, or that there internet is not fast enough. They say they would be profitable if their broker’s fees weren’t so high. These are just a few of the thousands excuses losing traders give for why they are not able to make money. Many losing traders have an external locus of control, and is a big reason why they are not profitable.
Every great trader knows that they are responsible for all of their trading results. At the end of the day, it’s your system, risk management, and trading psychology which is what is responsible for you becoming a winning trader. While retail traders are at a disadvantage, there are still many profitable retail traders that find a way to make money consistently.
A big reason why they are profitable is because they take responsibility for all of their mistakes. They figure out what they did wrong, and then they figure out a solution to combat this issue in the future. They are in a continual process of refinement because they have an internal locus of control. Developing an internal locus of control will allow you to succeed in all other areas in your life as well.
Winning traders do not let emotions affect their decisions in their trading. They know that the market is random, but there trading strategy has an edge. This means that they will make money in the long run, as long as they follow their trading system to a “T”.
They do not get excited when they are up on a trade, and take profits just because they are in the green. They do not get stubborn and fight losing trades because they believe that their opinion is more important than the market’s. They always have a trading plan before going into a trade, and they always stick to it, regardless of what happens. All of the planning is done before the market opens.
3. Macro Focused
We cannot emphasize this point enough. The best traders understand that losing days, sometimes losing weeks and months, can happen even in the most profitable trading systems. But winning traders think like a casino, and know that they will win in the long run. Even if your win rate is very good, let’s say 70%, you will still have 3 losing trades every 10 trades you take on average.
These 3 losing trades could happen 3 times in a row. It is their duty to get a large enough sample size, meaning they take all the trade signals their system indicates, no matter what happened on the last trade. They focus on their weekly and monthly PNL, not what happens in an individual trading day.
It is one thing to know what you should be doing, and another thing to actually do it. Every trader knows they should obey their stop loss to preserve their trading capital. But yet so few actually do it. Discipline is what separates winning traders from the traders who don’t have the discipline to follow the trading rules of a profitable system. You can give a trader a perfect, profitable system, and he may still not be able to make money.
Since you have no boss as a trader, there is no one to force you to follow your trading rules. Every trader is essentially the CEO of their own small business. Since you are the CEO, it is your duty to follow your trading rules to keep your business alive and profitable. The only thing that will keep your trading business alive once you have rules established is your discipline to follow rules.
5. Process Orientated
All the winning traders I know never go into the trading day expecting to make a certain amount of money. Losing traders go into the trading day expecting to make a certain amount of money, because they want to get paid for the time they put into it. Trading is not a profession where you get an hourly wage. The trading elite focus on their trading process, not about the money they will make or lose.
There will be some days where you may make $1000 in 5 minutes. There will be some days where you trade for 6 hours and end up losing money. You cannot trade with an expectation that the market owes you anything. Successful traders know that the only way to make money in the markets is to develop a profitable system, and then stick to it no matter what. They know that if they focus on their process and system, the money will follow.