What Defines A Great Trader? – Guest Post
Learning to trade options isn’t as difficult of a process as many beginning traders may think. Sure, there is a learning curve, and you’re likely to see some losses in the beginning, but almost anyone can learn the basics of option trading with a proper level of commitment. For some though, trading seems to come easily. What sets these “natural” traders apart from the rest?
Here are 6 different attributes which define a great trader:
1) Being Skilled With Numbers – If you’re not good with numbers, options trading might not be the best fit for you. Traders deal with numbers constantly and sometimes it can get confusing. Thanks to the processing power of computers, you don’t need to be a rocket scientist, but keeping track of countless points of data can be difficult if you’re constantly mixing up your rolling averages and gammas.
2) Patience Is A Virtue – Many people have a false perception of options traders. They picture someone sitting in front of five monitors watching charts and tickers and constantly trading investments on markets all around the world. In reality, option trading means identifying a potential opportunity and having the patience to wait until the market conditions are 100% right. Trading isn’t always exciting – sometimes it can be downright boring.
3) Learn From Your Mistakes – You’re not going to be a perfect trader. You’re going to make mistakes, and that’s okay – as long as you learn from them. There are two types of trades – profitable ones, and ones which provide with an options trading education. Even the best investors experience losing trades, but the secret is to identify what went wrong and use that information to improve your trading in the future.
4) Knowing When To Fold – As an options trader, you must know when to cut your losses. Having the potential downside to your investment set in stone can prevent you from letting human emotions drag your portfolio down with a poor stock choice. Even the “best looking” trades can run into trouble – learn when to fold your hand and walk away. A trade’s downside and associate risk should be incorporated into your overall trading strategy and planned for accordingly.
5) Balancing Trading With A Personal Life – Too many traders get wrapped up tracking charts and researching companies. Dedication is great, and is needed to learn the ropes and establish yourself as a successful investor, but not at the cost of your personal life. Not taking time away from the computer to spend with your family and friends can lead to stress and an overall feeling of discontent – both of which can cloud your judgment and negatively affect your trading.
6) Keeping Your Focus – If you’re just getting started trading options, take a minute to write down your motivation for doing so. For most people, it’s for financial freedom from their career. Glance at your motivation daily – for too many people, trading becomes their lifestyle instead of a means to the lifestyle they wanted in the first place.
Becoming a successful trader is more than just knowing the “Greeks” and becoming proficient at reading charts and trends. Having the proper mindset and crucial skills can elevate your trading to the next level. While some traders might look like “naturals” to those getting started in options trading, they are simply just the investors who understand these golden rules and apply them to both their trading and personal lives.
Liam Ball is a prominent blogger in the financial world and shares his insight on some of the top leading financial blogs around the globe.