We have all heard of the Wall Street legend, which says that if one takes a traders on the US market every day, they will be profitable over ten years by sheer luck alone.
Besides reading charts and visit the company website for more info, what does a trader need to succeed?
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A disciplined approach
Success relies heavily on discipline to make consistent gains on the stock market. It includes having an organized trading method, sticking to a set schedule, and not overtrading (i.e., following your rules and only making bets that fit your personality and attitudes).
For example, one unique difference I noticed is that some US traders will close all their positions at 4:00 pm sharp every day – this helps them avoid any additional trades after hours, leading to bad decisions or too much risk-taking.
Many traders succeed because they spend more time researching than trading and have strict, self-imposed risk management rules such as never risking more than 2% on the trade, so they keep their emotions in check and don’t get greedy.
Overcome your fears
Another discipline needed to succeed is the ability to overcome fear. The stock market is very psychological, and keeping calm can help you make better decisions. It’s essential also to know yourself – some people are more prone to be risk-takers or conservative with their money, so trading fits their personality.
In contrast, others may do better in other avenues of investing. Knowing what type of investor you are will help you make better investment decisions and stick to a schedule that matches your character.
Managing your time is another critical discipline for traders with full-time jobs. One of my interviewees had an MBA degree plus was working on his Ph.D. degree when he began trading stocks! He had to find a way to balance his time and devote certain hours and days to trading – he found it fit best into his schedule on Sunday through Thursday nights.
Don’t be afraid of losing – embrace the volatility!
Anyone who has traded for a while knows there are some terrifying down days on the market which result in significant losses. However, many traders I interviewed had learned that these swings come with the territory and that they must embrace them as part of the process.
Suppose you can manage your emotions well enough. In that case, any day is another opportunity for profit because eventually, one trade will work out even if you end up taking several significant losses beforehand. It also ties into keeping risk manageable because if you know what your bottom limit is, it’s less likely to take on too much risk at any one time.
Develop your skillset
As with many things in life, the more experience you have, the better you get. It’s essential to gradually learn about everything involved in trading stocks beyond just reading charts. Which is why learning technical analysis, reading economic calendars and news, and finding out what events could affect specific markets or companies can help bring perspective into making wise investments decisions.
It’s also essential for traders to develop their interpersonal skills because many different online brokers charge lines of credit for placing trades quickly, while chatting with clients brings rapport. You can find out what works best for each trader depending on various factors such as personality type or comfort level, so adjusting your strategy is critical.
Stocks are one of the best assets you can learn about outside real estate. It’s essential for traders who want to make consistent gains to develop their discipline, overcome fears, manage time well, embrace uncertainty and expand their skill set. It may take several attempts before they succeed, but this process is part of learning what works best for them individually to act when trading with their own money.