Millions of people start their trading careers every year. Unfortunately, most of these people usually fail. Some even go bankrupt after making significant losses. At Real Trading, we have seen some really successful traders go out of business within a short duration.
Then…How can you replicate the same success that some professionals achieve every week? Unfortunately, there is no magic formula. But several things, together, can help you achieve success.
For example, developing good habits can prevent you from making a bunch of common mistakes (which would cause you to lose a lot of money).
In this report, we will look at the five key habits that all successful traders have.
Table of Contents
Trading Routine
Most successful traders have a routine that they use every day. The benefit of such routine is that it helps them simplify their trading approaches. It also helps them identify new ideas and make relatively successful trades every day.
If you are a forex trader, this routine could be to first look at the economic calendar and read the most relevant news.
If you are a stocks trader, this routine could be looking at the top pre-market movers and their volumes. It could also be looking at the news behind the market activity. Most importantly, they have a post-trading routine, where they review their daily trades.
Trading Journal
We have written about a trading journal in the past. For starters, a journal is a soft or hard copy document that helps you track your trades. In a journal, you write down the trades that you are waiting for and those that you have closed.
You should also record the initial volume of the trades and the profit or loss for each trade.
Most importantly, you should journalise the reasons for buying or selling the asset. At Real Trading, we have an automatic tool that helps to journalise these trades. If your broker does not offer you the tool, we recommend that you create an Excel spreadsheet to do it.
Test and add strategies
As a trader, you already have a trading strategy that you use every day. If you don’t have a defined strategy yet, we recommend that you work to build it.
This strategy could be scalping, algorithmic trading, or even swing trading. You could also be using certain indicators, like the volume-weighted average price (VWAP) and the moving averages.
Regardless of the strategy, we recommend that you test and add more strategies as you go. The benefit of this is that it will help you trade in choppy markets. It will also help you to increase your profits by having a diversified approach to trading.
Related » Why Backtesting Your Trading Strategy is Critical!
Apply capital to winning strategies
This point ties to the second and third points. As we have mentioned, you need to have a good trading journal that mentions all your winning and losing trades.
In the next step, we mentioned the need to test and add strategies. This step involves looking at the journal and identifying the winning and losing trades and looking at the patterns.
For example, it could be that you make a lot of money in penny stocks than in large recognizable brands like Apple and Microsoft. Similarly, maybe you make more money in emerging market currency pairs than in majors.
By analysing this data, you should now focus more on the winning strategies.
Trade your own ideas
A common mistake, especially among new traders is to dwell mostly on what analysts say. They read the popular websites and find trading ideas from leading professionals and apply them.
This is wrong because analysts tend to be wrong most times!
Related » Is Herd Behavior of the Investors Risky?
Therefore, we recommend that you conduct your own analysis and implement ideas based on what you see. If you are part of a trading floor, you should be open to the idea of deliberating on these ideas with your team mates. By so doing, you will be at a good place to avoid mistakes and identify trading opportunities.
Understand different trading styles
Another important habit you need to develop as a trader is on how to trade different trading styles. This is an important aspect since the market goes through different cycle.
In some, the market can be highly volatile while in others, the situation could be range-bound. Therefore, you need to know how to navigate those market conditions.
Exploit multiple assets
Having a good understanding of multiple styles will help you identify trading opportunities across multiple assets.
For example, fundamental analysis skills will help you to study assets during various periods. In stocks, they will help you trade the earnings season while in other assets like forex, they will help you trade economic data like NFP and inflation.
In other words, knowing multiple trading styles will help you navigate all market conditions and be successful in them.
Why you should break bad habits
There are several reasons why you should work to break bad habits when trading. Some of these reasons are:
- Boost your profits – The most important reason why you should break your habits is that it will help you boost your profits.
- Avoid simple trading mistakes – By breaking trading habits, you will be able to avoid simple mistakes.
- Emotional well-being – Your emotional well-being is very important for you to succeed in the market. By breaking bad habits, you will be at a good place to be better mentally.
- Risk management – Breaking bad habits will help you embrace quality risk management strategies.
Final thoughts
Having a habit is an important thing for you to become a successful day trader. Indeed, all successful traders have such habits.
If you are just beginning, we recommend that you have time to create a strategy, backtest it, and then create a good trading habit.
External Useful Resources
- 9 Successful Day Trader Habits – Timothysykes
- 7 habits of a successful trader in the equity markets – Motilaloswal
