Well-honed trading skills and a clearly-defined edge comprise key elements in the quest for long-term success in financial speculation. But all the books, websites, and mentors in the world can’t overcome a bad attitude and mental roadblocks that undermine trading performance from initial preparation to the final exit. Perhaps that’s why successful traders share common psychological characteristics.
Let’s look at some of the mental attributes that guide the decision making of successful traders. These positive characteristics comprise an incomplete list but offer an excellent jumping-off point for other market participants to consider how closely they match these winning traits, or how far they are from fulfilling their market and non-market goals.
1. Optimistic Attitude
Successful traders display a healthy dose of optimism, even when it isn’t supported by the latest profit and loss statement because they know that drawdowns are temporary and that they have the skills needed to build back profits. They also understand that trading is a zero-sum game that divides up winners and losers, and visualize themselves on the winning side at all times, regardless of short-term results.
2. High Self-Esteem and Self-Worth
The modern education system focuses great effort on self-esteem and self-worth in the student population, but the transition into adulthood may undermine this effort, leading to negativity, cynicism, and self-doubt. Each of these attributes has an impact on profitability because the emotional nature of buying, selling, and assuming risk requires visualization of the most positive outcomes, which is undermined when we believe we aren’t good enough to be financially successful.
Modern society is infused with negative attitudes about wealth that traders must overcome in order to book consistent profits. It’s become a sideshow of haves and have-nots, with haves on stage in reality shows like Keeping Up With the Kardashians, while the media publishes endless stories about income inequality. Meanwhile, the middle class at times carries around a profound sense of scarcity, always feeling there isn’t enough money or resources to obtain the things in life that they deem important.
Successful traders address issues of scarcity and doubt early in their careers, understanding that it will be impossible to turn consistent profits if they don’t feel worthy of financial gain. Over time, they understand that self-confidence comes in small steps, by making the right decisions, one at a time. In turn, they ruthlessly examine each trading day in retrospect, confirming that confidence and wealth-building guided each action. Over time, this self-reflection pays huge dividends.
3. A Sense of Internal Power
We all have to work through the duality of power and powerlessness in our professional and personal lives. Many in modern society may feel like victims, with wrongdoing always coming from external sources that can’t be controlled, while our spouses and family members may reinforce this powerlessness by offering negative conditions, demands, and emotions that increase our sense of discomfort.
Successful traders address this challenge with great enthusiasm, knowing that building their personal power offers a direct path to prosperity. They spend a good deal of time reflecting on the sources of conflict in their lives — recognizing the ways they can defuse stressful situations. Throughout this process, they refuse to wave the victim’s flag, instead taking personal responsibility when things go wrong.
4. Balance Away From the Market
Your experience in the financial markets reflects a perfect image of your life away from the financial markets.
For example, destructive habits like smoking, overeating, and drug use directly correlate with poor trading performance. Struggles with spouses, children, and family add to the burden, as do a lack of exercise, uncontrolled anger, and obsession with political outcomes.
Successful traders spend as much time working through personal issues as they do in market preparation. They take care of their bodies with healthy diets, while understanding that recreation is a vital activity in keeping trading performance at peak level. They also seek the guidance of clergy, mental health professionals, or gurus when their own efforts to achieve balance come up short.
The Bottom Line
Successful traders share positive psychological characteristics that enhance their personal power and the ability to create positive outcomes, including a commitment to physical and mental health and stress management.