What makes a trader successful in the long-run? In my opinion, it is coping. Not blind faith or euphoric unsubstantiated enthusiasm, but the ability to continue through good and bad periods as your portfolio goes up and down. Coping, in this sense, is the ability to handle all the psychological pressures that are associated with sitting in front of the trading screen.
The concept of recovering from hard times is an important concept. I am not comparing trading losses to other personal losses; never the less, financial losses can have a significant impact on a trader’s motivation and morale. Your ability to recover from previous hardships will make a difference in how you approach your future success.
Trading amplifies your weaknesses and downplays your strengths. Your challenge is to reverse the process and capitalize on your strengths while becoming conscious of your fears. What does “coping” mean to someone who wants to make a career out of trading? Three things come to mind:
- Maintaining the same level of energy. Regardless of good or bad periods. In other words, where winning days are not accompanied by euphoria and losses by depression.
- Continuously learning. Even past the point of whatever yardstick for success you use. That is, don’t let a winning streak convince you that you’ve “made it”.
- Staying focused. Especially during times when most traders would get bored out of their mind. Boredom leads to overtrading and impulsive behavior.
I encounter successful traders who trade with Optimus Futures, and I can honestly say that each person has a different character. However, there are certain characteristics that seem to form the basis of most successful trader’s mental set-up – the ability to learn, paying attention to details, researching methods on an ongoing basis and above all, recovering from very painful periods.
Let’s talk about the pain factor.
Some people get utterly depressed from losses. I don’t blame them. But depression is not a strategy, and it will rarely lead to a better trading decisions. What I have seen is that successful traders simply do not get depressed. I am not saying it does not affect them, but nevertheless, they learn from their experience and re-apply their studied methods. Again, I believe that losses affects all traders. The difference lies in how they react to it and the steps they take to avoid repeating the same mistakes going forward.
The successful traders I know have an internal belief system that turns every trading mistake into a learning experience. This is why trading is not for everyone. In trading, any promise not to repeat mistakes HAS to be accompanied by a plan that addresses the issue and understands the root cause of the error. Throughout your trading career, you will go through this a few times until such time you come up with a list of “TO DO’s”. This will serve as the basis of your trading throughout your career, under all market conditions. It is important to note here that no one else can come up with this list. This list will be a personal manifestation of your own trading habits and the psychological response to those habits.
When I first started out in the financial industry, I underestimated the core mental strength you need to establish yourself as a long term trader. I always attributed the success of a trader to his or her work ethic combined with deep analytical skills. I can see clearly today, and especially after the 2008-09 crisis, the importance of the ability to recover, re-think and re-apply strategies without constantly resorting to blaming the markets for the hard and volatile years.
Trading is a competitive business, and those who excel in it accept the reality and difficulty of trading. They fully understand that overcoming the tough periods is not only done with a short-term enthusiasm drive, but rather a long term “daily grind” to learn and grow as a trader.
If you have ideas on how to help others during difficult periods, please share with our readers below.
Matt Zimberg | CEO | Optimus Futures
There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.
