Characteristics of a Successful Trader

[Shreddog]

When you stop being humble you stop looking for the next landmine you might step on.

When you stop being thrifty you might not survive the next dry spell.

As for the rich guys you read about in market wizards. You have a built-in bias in that book leaning toward people who welcome the attention. There's no way to know how many more modest successful traders there are.

 

[ivanbaj]

Another one:

Successful trader understands that some market participants are risk-averse and some are risk-seeking.

The risk-averse are willing to pay to the risk-seeking.

BUT

risk-averse are willing to pay to the risk-seeking not enough to justify the risk. Hence money flow from the risk-seeking to the risk-averse. Unless the risk-seeking makes the risk-averse pay the proper amount plus profit.

hahahaha

I am not sure what the risk-neutral do on the market.

 

[EricP]

Quote from Arjun1:

Being thrifty may not always a good idea.

For example, driving is one of the most dangerous things anyone of us can do. And when you get into an accident its much better to be in a 75k Lexus than a 25k Toyota cause the Lexus has all kinds of active and passive safety features that can save lives.

And if a trader blows up - he is much better off with a 1 million dollars in home equity than 100k in home equity. Because after the blowup - at least the guy with a 1 million dollars in home equity can sell the house and he can have 1 million to live off of and rebuild.

Having 200k in gold can also be a great idea if hyperinflation takes hold all over and all fiat currencies collapse.

I agree with much/most of what you said. I'll plead guilty to owning a nice Lexus (and have previously owned a Toyota Corolla). The Lexus certainly offers a nicer ride, and is no doubt much safer, as well.

I also agree with your comments on a house or gold, although I would counter that those are often considered appreciating assets which a 'thrifty' person could own without feeling especially guilty.

I guess the 'thrifty-ness' that I see among successful traders is somewhat related to their income. If they are making 10-20k per month, they might be spending 3-6k per month (which would be considered thrifty for that income level). If they make 100k per month, they might spend 6-15k (splurging more often but still spending substantially below their incomes). So, while they might seem to live a comfortable life (and they do), they don't spend to excess, relative to their income, potentially requiring spending cuts during the 'slow times' for their trading. Their comfort with spending increases, not necessarily with their incomes, but with their total net worth, recognizing that incomes can come and go, while net worth is more stable for the long term.

I can't think of a single successful trader that I know, who spends 50% (or more) of his after tax income. Most probably spend less than 20%, I suspect.

 

[TSGannGalt]

Quote from volente_00:

The best money management skills in the world are worthless if you are AFRAID of taking the trade.

People do crazy things when they don't what the hell their doing.

I think that those extreme "feels" come from lack of clarity. In most cases, I think it comes from people fearing that they might lose. If the SCARED trader knew what they were doing, they wouldn't be AFRAID of taking a trade.

Look at most of the voodoo things people did... killing and sacrificing people solar eclipses and believing the world is flat. Blaming the devil for being sick... etc. etc. etc.

 

[TSGannGalt]

Quote from heypa:

tsganngalt Try the dictionary. Look up character and then characteristic which was what this thread was about.

Don't want to get all philosophical but is winning more losing an innate human character(-istic)? Last thing I want is get into Platonic Virtue debate but I'm a bit lost with your post.

Aren't trades supposed to be a result of the trades people take? Those basis comes from a reaction of the market.

Is this another debate on:

Reaction (Trade) is... a rational/logic? Or psychological feedback?

 

[TSGannGalt]

Quote from Shreddog:

When you stop being humble you stop looking for the next landmine you might step on.

When you stop being thrifty you might not survive the next dry spell.

As for the rich guys you read about in market wizards. You have a built-in bias in that book leaning toward people who welcome the attention. There's no way to know how many more modest successful traders there are.

This is off-topic, "most" of the guys on Market Wizard has busted or quit trading. Interesting thing is they all quit when Electronic Trading started taking over futures market and decimalization.

This is only what I've heard... but... those 2 events took away their edges and quit trading by stepping out or busting their accounts.l

 

[TSGannGalt]

Quote from ivanbaj:

Another one:

Successful trader understands that some market participants are risk-averse and some are risk-seeking.

The risk-averse are willing to pay to the risk-seeking.

BUT

risk-averse are willing to pay to the risk-seeking not enough to justify the risk. Hence money flow from the risk-seeking to the risk-averse. Unless the risk-seeking makes the risk-averse pay the proper amount plus profit.

hahahaha

I am not sure what the risk-neutral do on the market.

Risk Neutral? They got caught up by CDOs.

 

[TSGannGalt]

Quote from EricP:

I agree with much/most of what you said. I'll plead guilty to owning a nice Lexus (and have previously owned a Toyota Corolla). The Lexus certainly offers a nicer ride, and is no doubt much safer, as well.

I also agree with your comments on a house or gold, although I would counter that those are often considered appreciating assets which a 'thrifty' person could own without feeling especially guilty.

I guess the 'thrifty-ness' that I see among successful traders is somewhat related to their income. If they are making 10-20k per month, they might be spending 3-6k per month (which would be considered thrifty for that income level). If they make 100k per month, they might spend 6-15k (splurging more often but still spending substantially below their incomes). So, while they might seem to live a comfortable life (and they do), they don't spend to excess, relative to their income, potentially requiring spending cuts during the 'slow times' for their trading. Their comfort with spending increases, not necessarily with their incomes, but with their total net worth, recognizing that incomes can come and go, while net worth is more stable for the long term.

I can't think of a single successful trader that I know, who spends 50% (or more) of his after tax income. Most probably spend less than 20%, I suspect.

I had a time, when my trade income was around $100,000. 30% of it went to paying for equipment and trading services. I had bills to pay on top of that.

You're talking too much from your own situation. It's easy to tell people to be frugal when you are making a lot more...

Seriously... you pay what you have to. You don't want to over-stress yourself trying to keep your spending less than 20% if your starting up.

 

[TraderGreg]

Hi Eric,

I have a qualifications I'd like to make while I'm thinking about them. I haven't read the whole thread yet however, so feel free to respond to what's applicable.

I took some of this idea from Jack Hershey in one of my threads, but it is an idea I have been practicing myself (his terms). He stated that developing trust and value with yourself and the market is the key.

I think this is the medium between being afraid to take trades and overconfidence. This, in turn, means that you can admit mistakes, admit you will have mistakes, yet still be confident (trust) in your approach and that it will be successful.

For example, my mental trading was spiraling downhill after I was consistently taking losses until I mentally imploded with lack of trust and confidence in my methods, which lead me to be afraid. Now, I am working on developing concrete strategies that work - ones that I can trust to work - and with which I will subsequently happy to take small losses and continue trading with the confidence of a larger perspective of achievement.

I am working to develop trust in my strategy, trust that the market will allow my strategy to remain profitable, trust in my execution of the strategy, and later hope to build and implement new strategies I can trust myself with the market, and eventually the top level of trust - the trust that I won't need concrete strategies to trade and will understand the movements of the market (a level few traders have achieved).

I think I would also like to add that successful traders have a solid backup plan. This can mean several different things, but especially multiple strategies, backup capital for both trading and living (when possible, clearly most traders would have to become profitable and somewhat successful before this can be attained), and a prepared plan in the case of any failure.

Couple questions:

What are your views on these traits being natural versus learned in the market?

Do the traits apply to programmers?

Edit: I hope someone added the quest for independence...

 

[saxon22]

Quote from EricP:

I agree with much/most of what you said. I'll plead guilty to owning a nice Lexus (and have previously owned a Toyota Corolla). The Lexus certainly offers a nicer ride, and is no doubt much safer, as well.

I also agree with your comments on a house or gold, although I would counter that those are often considered appreciating assets which a 'thrifty' person could own without feeling especially guilty.

I guess the 'thrifty-ness' that I see among successful traders is somewhat related to their income. If they are making 10-20k per month, they might be spending 3-6k per month (which would be considered thrifty for that income level). If they make 100k per month, they might spend 6-15k (splurging more often but still spending substantially below their incomes). So, while they might seem to live a comfortable life (and they do), they don't spend to excess, relative to their income, potentially requiring spending cuts during the 'slow times' for their trading. Their comfort with spending increases, not necessarily with their incomes, but with their total net worth, recognizing that incomes can come and go, while net worth is more stable for the long term.

I can't think of a single successful trader that I know, who spends 50% (or more) of his after tax income. Most probably spend less than 20%, I suspect.

thanks for clearing that up. Driving a 20 year old air bagless car is stupid, driving a Ferrari is overspending and purring around in Lexus is Ok (for people who make <20K/month that is). You guys got me thinking that you are a bunch of cheapos driving beat up cars and eating out the cheapest take out there is while having 7 figure account.