WHAT YOU NEED TO KNOW ABOUT MASTER TRADERS – PART 7
“Of all of the
lies my
traders tell themselves, the one that shows up the most frequently is “I don’t
think I can do this.” – Louise
Bedford
Name: Toni Hansen
Nationality: American
Occupation: Full-time trader and mentor
Website: Tonihansen.com
ADRRESING THE
TOUGHEST TRADING QUESTIONS
A respected technical analyst and full-time trader with
decent profits from weak and strong markets, Toni started her career as an
equity swing trader, after which she mastered other types of financial markets.
She has crafted ways to tackle stocks, futures, options, ETFs and Forex,
surviving uptrend, downtrend and equilibrium phases in the markets.
She’s spoken at many trade shows and expos. She’s
contributed to Real Money Pro, CME Group, Active Trader, Money Show, Trading
View, etc.
Toni has always traded and coached many professionals in
various fields of financial industry, including other people outside the financial
industry. She quotes other great traders in her writings.
Please check her website. Tonihansen.com is rich with very
helpful trading articles, insights, lessons and courses, which can help
beginner, professional and advanced traders. For example, you can get a
one-stop shop for in-depth lessons on introduction to technical analysis,
candlestick charting, trends, indicators, fear and greed, money management,
advanced courses on trends, various ways of determining resistance and support,
Fibonacci levels, market reversals, selecting your trading style, and so on.
Giving answers that work, Toni has also made bold attempts
to address the toughest questions in trading, such as:
Which type of market analysis will I employ?
Which markets should I focus on?
Which strategies should I use for trading?
Which time frame should be my primary focus? Etc.
What You Need to
Know:
In order to have a taste of insightful tips and lessons Toni
has to offer traders, please read the article below. The article was taken from
her website and the link is located at:
Tonihansen.com/trading-lessons.html#traits
8 Traits of a
Successful Trader
The market is an ever-changing entity, each day presenting
us with different and unique scenarios with no two days every the same.
Nevertheless, the market is more or less a reflection of people's ideas and
attitudes and while it is also true that no two people are alike, each and
every one of us has something in common with someone else, whether it’s the way
we get out of bed in the morning or the foods we prefer to eat. Additionally,
we tend to repeat actions, such as preferring to brush our teeth at a certain
time of day or making sure we try to catch the Thursday night prime time
television shows. No matter which angle you look at it from, humans are
creatures of habit and this tendency gets reflected in a security’s price
movement. It's what makes technical analysis a reliable and profitable method
for analyzing the market.
Unfortunately, technical analysis is not always cut and dry.
The same core pattern does not work the same way in every market environment.
For instance, one of the setups I often look for on a daily chart is a 3-5 day
pullback in an uptrending stock for buying opportunities. Where newer traders
tend to get in trouble, however, is taking such a setup to mean that every time
an uptrending stock pulls back 3-5 days and then breaks the previous day's
highs that it means they should buy it. In reality, there are always exceptions
and its learning what these are that can be the dividing line between those
traders who are successful and those who fail. In this example, how a security
pulls back in a primary uptrend, as well as overall market conditions, will
greatly influence whether taking such a pullback as a long is really worth the
risk to reward. In some cases it is not.
The ability to adjust to changing market circumstances is
just one of the traits of a successful trader. In truth though, there are quite
a few. Over the years I’ve mentored quite a few traders. Many succeeded, but
many of the traders I have spoken with over the years have failed. I have
observed a number of traits which are present in those who succeed. Some of the
top traits of successful traders are as follows:
1. Staying Neutral
You're probably wondering away just what do I mean by
“staying neutral.” When you are chatting with your trading buddies online or
reading a message board and all you hear are how the market maker or specialist
is out to get them, or how one minute they are a market god and the next they
have what is certifiably the worst luck in the entire world, then you are
dealing with a trader that is NOT staying neutral! They are letting each trade
or each trading day rule their emotions and this pressure builds upon itself,
making it very difficult to succeed.
The professionals don't let the day to day oscillations in
their accounts faze them. The results of one day of trading, or even a few
weeks or a month are not as important to them as the average over time. Among
most of the professional traders I know, you cannot tell by their mere
appearance whether or not they had a great day in the market or if they lost.
Sure, they may tell you one way or the other.
We are not robots devoid of all emotion after all, but when
we leave the market for the day after a difficult session, we are able to
disassociate it from the rest of the world and don’t spend the rest of the day
complaining or moping around the house thinking that entire world must be out
to get us. Similarly, on a great day, we do not call up every person we can
think of and tell them how we rule the market universe. Extreme emotional
responses either way will often lead to greater difficulty in the market since
emotions take over from reason and can often override it, making it difficult
to remain objective.
2. Have business Plan
Most successful traders also have a business plan. As in any
other profession, it’s important to know what it entails in order to succeed.
As in any business, this consists of a set of rules or guidelines to help keep
the trader on track and from making decisions purely on a whim.
Would you open a restaurant without a plan? No, or at least
I really hope that you wouldn’t! A new restaurant owner must take into account
the type of cuisine they wish to serve, the décor of the restaurant, the hours
of operation, to whom they are catering as clientele, etc.
As in the restaurant business, traders must also have a
business plan. A partial list of the questions you should be asking yourself
and including in your trading plan are as follows:
How must time will you spend study and trading?
What techniques and strategies you will focus on?
What are the expenses involved in becoming a trader?
What is your maximum loss limit, not only per position, but
on your account as a whole?
What are your objectives?
etc...
The more comprehensive your plan is, the better. You can
always go back and change it, modifying it to suit your development as a
trader. I find that it is very helpful, for instance, to go back and read over
my techniques and goals whenever I am in a slump and my progress has stalled.
It helps me maintain the right frame of mind so that I can push forward.
3. Keep a Journal
One of the first questions I ask any of my new clients is
whether or not they have a trading journal, and if you, what does it consist
of.
Most traders don’t even have a journal. Those that do have
one typically keep it in a spreadsheet format. This offers very few insights
into a trader’s personal style and strengths and weaknesses. Some things to
consider when developing a trading journal are:
What techniques were used in locating the position?
Did you follow your entry, stop and exit criteria?
What pros and cons did the setup have?
What, if anything could you have done better and what are
you most proud of?
It is also important to print out a chart of your trade.
Mark both the entry and exit on the chart. If necessary, print it out on
several time frames to show the details of the position.
4. Focus on Several
Techniques that Work Well
Let’s take a minute to look at a typical college student.
What kind of person majors in general studies? Unless they go on to focus on a
specific occupation in graduate school or law school, etc., well-paying jobs
will be hard to find for most of these students upon graduation. Instead, for
those who focus their studies in one field, and more specially, one subdivision
of that field, demand for their skills will be much higher. If you focus on
just a few techniques, it allows you to really become an expert on the
technique you are using. Great traders have several strategies that are their
bread and butter plays and they will focus on them for as long as the market
conditions favor them.
Remember: The jack of all trades and master of none is usually
a low-paid, unskilled worker.
5. Being a Great
Money Manager
Great traders are also great risk managers. They respect the
risks they are taking and on each trade they risk a small amount of capital.
Usually this is 1/4% to 1% per position (and no more than 2%). The idea is that
you can't trade tomorrow if you blow out today and if you can't trade you won't
be a great trader, now will you?
Great traders protect their accounts. It's their baby. Each
position is so small they don't really care what happens with it. It's just a
nick... win, lose, or draw. So, if they have a 200K account and are risking
1/4% on each trade, if they take a stop they are out $500. That's a very small
amount of money compared to the account. They can take a couple of hits and
still be in the game.
6. Being Comfortable
with Risk and Uncertainty
The sixth trait of great traders is that they are
comfortable with risk. Let's face it, trading is certainly risky and if you are
afraid of the risk you won't last. If you are afraid you will lose money, then
I can say with near-certainty that you will.
Great traders are comfortable trading a pattern that is not
a 100% sure-thing, because there simply is no such thing. Many new traders have
a terrible time with this: the uncertainty of a trade, but you must overcome
it. It is very easy to allow yourself to become frozen with fear over the risks
and uncertainties of trading. Great traders get beyond it.
7. Accepting Personal
Responsibility
Great traders accept personal responsibility for everything
they do, even to an extreme. If I loan you $100 and you never pay me back, then
yes, perhaps you are not a very honorable person, but I also made a poor choice
to lend you the money in the first place. I made that choice, however, and I
must accept personal responsibility for that action.
The same concept applies to trading. Many traders, lacking
the expertise and confidence to make all their own decisions to begin with,
will rely upon others for advice. The input may come from CNBC or it may come
from a newsletter service or trading chatroom or message board. It doesn’t
matter where you get the original idea from, it is still up to you to implement
it or not and you have the due diligence to stand behind your decisions and
make them your own, whether they succeed or fail.
8. Using Risk Capital
to Trade
Finally, great traders use risk capital. This should be
obvious. They trade with money they can afford to lose. It is very difficult to
trade well if you are worrying about paying your mortgage or putting food on
the table. I’ve also seen a number of traders over the years take out equity
loans to open a trading account. You are supposed to be limiting your risk and
outside stressors, not adding to them if you wish to succeed. If you think you
can be one of the exceptions, then you should really think again!
Trading with risk capital frees up your mind. It lets you
trade and not worry about every little stop you have. You can just focus on
trading correctly instead of trying to force yourself to meet certain financial
needs. They say scared money never wins. Well, I have yet to see a person who
has no other source of income or savings make a living off their $5,000 trading
account.
Many of these traits may take a bit of time to acquire.
Overcoming the fear of loss, for instance, haunts many, but by focusing upon
these traits and characteristics, my hope is that you may model your own frame
of mind to those who have come before you and have made the leap to a
successful and long-lasting career in the markets. It is said that the majority
of successful people in the world became such by following in the footsteps of
others, their mentors. Even if you do not have one specific person in mind,
familiarizing oneself with the traits of those whom have succeeded before you
is a great place to begin!
Conclusion: Many
traders have dreams but they don’t act on those dreams. Even when they act,
it’s usually one or two attempts, for they give up quickly as soon as they run
into difficulties. As far as they’re concerned, there’s nothing like
persistence. They think successful traders are successful only because they’re
lucky to have easy methods of profitability. NO. Ask successful traders, and
they’ll tell you how long or how many years it takes them to achieve consistency
in the markets. They’re not luckier than you: they’re only more persistent than
you.
This piece is ended with a quote from Toni:
“Knowledge is power. This is as true in trading as any
other area of life. Those who don’t know will eventually give their money to
those who do know. In this industry we have 90% of the money going to 10% of
the players. Do you want to be part of that 10%?”
What Super Traders Don’t Want You To Know: Super Traders
