Want to be a trader?

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Want to be a trader?

• The traits and characteristics of traders

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1. Needing and wanting money are good
motivations to good trading?
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NO!

• Money greedy traders tend to take on too much
  risk, make bad decisions and be impatient.

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Traits of a successful trader

• What are the most important qualifications for a
  successful trader - high IQ, discipline,
  patience?
• Most common answer is
• Discipline
• Patience
• ?. High IQ

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2. It generally pays off to double when your
initial trade moves against you (average down)?
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NO!

• Rule no. 1 Dont EVER average your losses

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3. A high percentage of trades should make
profit?
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NO!

• Several strategies advocate that having more than
  50 losing trades is perfectly fine. Most traders
  only hit few successful trades a year, but they
  make big money on them

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Traits of a successful trader

• Neuroticism
• Negative emotions anger, anxiety or depression
• Openness to experiences
• Sensation seeking and risk-taking
• Conscientiousness
• Orientation towards duty, responsibility and
  dependability

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Traits of a successful trader

• Neuroticism - LOW
• Negative emotions anger, anxiety or depression
• Openness to experiences - LOW
• Sensation seeking and risk-taking
• Conscientiousness - HIGH
• Orientation towards duty, responsibility and
  dependability

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4. You can never go broke taking profits?
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YES!

• If you take many small profits, but let your
  losing trades run, you will eventually go broke

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5. Staying abreast of current news, reading FT
and WSJ and studying investment banks research
reports, improves your trading performance?
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NO!

• News are always discounted into the prices of
  financial assets before you know it (unless you
  are an insider). News is therefore useless for
  short-term strategies.
• For long-term strategies daily news does hardly
  ever effect the markets long-term trends

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Dont trust investment banks

• April 2001 Credit Suisse was following 1328
  stocks world wide
• SP500 1160 (down 24 from the top)
• How many sell recommendations did they have?

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Dont trust investment banks

• April 2001 Credit Suisse was following 1328
  stocks world wide
• SP500 1160 (down 24 from the top)
• How many sell recommendations did they have?
• 11! (0.83 of all stocks on their watch-list)

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Want to know more

• Brett N. Steenbarger
• Read The Psychology of Trading
• brettsteenbarger.com