5 things Confident traders do, that other traders don’t!
Good day Trader,
I have (and you probably all have) read articles and commentary about the importance of having a trading system, trading strategy, and a trading plan when trading. Always heavily emphasized in these articles is the importance of sticking to your trading strategy and trading plan, and to avoid the tendency of system hopping.
I have personally authored a few articles on the above issues, which can be accessed on our blog.
This week, I’m going to re-look at these issues, but coming from the angle of how confident traders embrace these trading principles.
But before we dive into that, here is a brief update about our GetSelected trader incubation Program
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Back to the business of the day.
Let’s look into the 5 things that confident traders do (and don’t do) that non confident ones don’t (and do).
#1. They do the scary things.
Profitable, confidence traders seldom take the easy way out when it comes to their trading. They do what most traders avoid, because they know, money is on the other side of those scary things.
As an example, it is often the case with most traders that when a trade is in the money, they bank it quickly, fearing that the market may reverse and go against them. Believe you me, I have been there; it is an emotional torture to watch a trade go in the money, only for the market to reverse, go back to your entry, and maybe hit stop loss. So non-confident traders may feel justified in banking small profits to avoid seeing those profits disappear. But that’s the easy way out. Confident traders are confident in their set ups and they let their trades run to full take profit target; and they have the emotional stamina to withstand the torture that comes with seeing an ‘In the money’ trade reversing ‘out of the money’.
In short, don’t get used to banking small profits; it is banking big profits that will grow your Portfolio.
#2. When its time to take a loss, they just take it!
One of the biggest undoing of retail traders is that when it comes to taking a loss, they tend to create a bubble of comfort for themselves. They do this by moving their stop losses. By doing this, they give themselves the false comfort that they are still ‘correct’ since they are still in the trade.
I will admit, taking a loss is one of the hardest things to do as a trader, because it means admitting that you are wrong. But admitting that you are wrong is one thing, staying wrong, is completely another thing. The latter is destructive.
So cut your losses quick and move on to the next trade with a smile!
#3. Opinions of others are just noise to the confident trader
If there is one sure way of losing confidence in your system as a trader, is to sit around Bloomberg TV or CNBC all day and listen to the opinions of market commentators and analysts. Not to say listening to news, market commentary and analysis is wrong; it isn’t, the problem comes when this commentary and analysis make you sway from your trading system and trading plan.
Confident traders have a set of rules, proven trading strategy; and they treat everything else as noise.
#4. They don’t seek reassurance
It’s always comforting to know that what you are thinking, or how you are viewing a certain set up is how a top analyst or trading guru is also viewing same.
As a trader, it is important to ‘follow’ a couple of experts and trading gurus who have been in the game longer than you have been. By looking at their analysis, and set ups, you can pick an ‘orange’ or two; and that is how you will grow and continuously improve as a trader.
But that’s as far as it should go. Seeking their validation for every trade will surely not make you grow as a trader; it will just confuse you instead. Have confidence in your own analysis and set ups.
#5. Minor setbacks, they just take the lessons
After a period of losses, confident traders don’t throw in the towel. Instead they take it as a chance to develop mental toughness; and fine tune their strategy if need be.
First step in this process may be to lower risk per trade from say, 2% to 1%. Then look into your trading journal, analyze why your trading strategy is not working as expected or as it used to. But of course, no system will work all the time, so if after analyzing there is nothing wrong with your system, it will be time to take another lesson; ‘Just trust the process’.
In summary, the confident trader doesn’t babysit his trades trades, embrace periods of losses as periods of learning, dials down the noise, and generally learns to tough it out!
Once you can do that, you will be on your way to earning the Confident trader ‘badge’.
Until next time, let’s keep it profitable!
Head: Unum Capital’s GetSelected Division