Want to be a trader?The traits and characteristics of traders

#1. Needing and wanting money are good motivations to good

trading?

NO!

Money greedy traders tend to take on too much risk, make bad decisions and be impatient.

Traits of a successful trader

• What are the most important qualifications for a successful trader - high IQ, discipline, patience?

• Most common answer is:1. Discipline2. Patience?. High IQ

#2. It generally pays off to double when your initial trade moves against you (average down)?

NO!

Rule no. 1: Don’t EVER average your losses

#3. A high percentage of trades should make profit?

NO! Several strategies advocate that having more than

50% losing trades is perfectly fine. Most traders only hit few successful trades a year, but they

make big money on them

Traits of a successful trader

• Neuroticism– Negative emotions: anger, anxiety or depression

• Openness to experiences– Sensation seeking and risk-taking

• Conscientiousness – Orientation towards duty, responsibility and

dependability

Traits of a successful trader

• Neuroticism - LOW– Negative emotions: anger, anxiety or depression

• Openness to experiences - LOW– Sensation seeking and risk-taking

• Conscientiousness - HIGH– Orientation towards duty, responsibility and

dependability

#4. You can never go broke taking profits?

YES!

If you take many small profits, but let your losing trades run, you will eventually go broke

#5. Staying abreast of current news, reading FT and WSJ and

studying investment bank’s research reports, improves your

trading performance?

NO! News are always discounted into the prices of financial assets before you know it

(unless you are an insider). News is therefore useless for short-term strategies. +

For long-term strategies daily news does hardly ever effect the markets long-term trends

Don’t trust investment banks…

• April 2001: Credit Suisse was following 1328 stocks world wide

• S&P500: 1160 (down 24% from the top)

• How many sell recommendations did they have?

Don’t trust investment banks…

• April 2001: Credit Suisse was following 1328 stocks world wide

• S&P500: 1160 (down 24% from the top)

• How many sell recommendations did they have? – 11! (0.83% of all stocks on their watch-list)

Want to know more…

• Brett N. Steenbarger– Read The Psychology of Trading – brettsteenbarger.com