“Dumb people don’t learn, average people learn from their own errors, smart people learn from other’s errors”
There are common traits that bad traders share, and common traits that the good ones share, too.
This article will help you to identify which component of your behaviour you should drop, and which ones you should develop.
Let’s start with the bad one, as you are mean to abandon those ways of acting before becoming competent: you can’t simply build the good skills over a bad foundation.
Most newbies will identify with some of the habits below, there is no shame to be felt for that. Only people staying passive against their flaws should be embarrassed.
I think a lot of people overlook the fact that trading is a domain by itself, as is medicine, plane driving or lawyering.
Imagine what would happen if banks start employing average Joes as traders? That would be a disaster.
Speculation is an intellectual challenge. It is required to go both feet, deep into it, if you want to succeed on the long-term.
Most circlejerks such as Reddit, are full of hobbyists, who are not trying to learn or improve. They are all confirming and reassuring their biased ideas between each others. “Bitcoin will reaches the million”, “A dump of 50% doesn’t matter, it will reach the million next year.”
-50% doesn’t matter?! Wait next year to gain money?! Guess what; those people are not traders: they still undergo their 9 am to 5 pm vanilla job every day, and will do so all their life.
They confuse learning small unproven tips such as “buy the dip” and “hold while it dumps” with the real learning of trading.
Do not surround yourself with those people.
Most people getting into trading want to… open trades. They think trading is about opening trades, about being in the market. They think they have to get their daily/monthly gains, as they are used to with their regular job.
But if you force yourself to see opportunities where there is not, you are aiming to lose money.
The market doesn’t care if you had not made any profit since a month: you have to adapt yourself to it, because it’s the market that is going to adapt to your specific needs.
You should see the activity of “trading” as watching the market, keeping yourself ready to open trades, and doing so if the risk/reward ratio is interesting; not simply as the job of “opening trades.”
This takes some patience, self-control and self-honesty. You can work on that through mindful meditation.
Maybe it’s because of his sensible ego, but the bad trader blames other for his losses.
Some poorly skilled persons resolve to raging against the bad “market manipulators”, “insiders”, “fake journalists” or whatever they can to justify their losses to, I guess, not blame themselves and take their own responsibilities over their defeats.
Raging in the void against those who actually gained the money – those who you are inspiring to be – won’t do you any good.
The bad trader fears taking actions by itself, he needs assurance in those who he sees as “advanced traders”, and may act upon any tip or recommendation given.
Often, when traders share their opinion on the market, they only give a rapid judgment that doesn’t take into account your current (or maybe non-existent) position, financial resources, and your possibilities of losses. Nor they will share their full risk management strategy, or come to you to tell that their opinion changed due to new informations.
Although a lot of people will share their feelings about the market, nobody will do all the work for you.
You have to be independent: don’t rely on others.
Although he surely tries to incorporate some intellect in his decision-making process, the bad trader’s mind is ruled by his emotions.
As soon as he gets enough confidence to open a position, doubts and fear come to him. “Your money is at risk now!”, “What if I’m wrong?” and alike thoughts will blur his mind.
"The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor." - Jesse Livermore
Every good trader in the world have common traits, literally.
Try to find only one multi-millionaire that think of his domain of expertise as only another hobby, find me one that is impatient and don’t control his emotions, find me one that is consistently surrounded of idiots or goalless, motivationless people.
You won’t find any (Except lotto winners, but relying on luck is a rather bad strategy.)
“When someone thinks he knows everything, he stops learning.”
The good trader is always learning, and have a high level of curiosity.
He doesn’t learn new indicators or new fancy ways to display candles, no. But for each trade that goes wrong, he asks himself: “what happened here?” and “could I have avoided that? If yes, how?”.
For each trade that goes well, he asks himself: “how could I have done better?”, “what should I remember about this good trade, and keep applying in the future?”.
Everybody make losing trades, even Warren Buffet. This is normal, but you should do all you can to minimize those bad probabilities, and maximise your gains.
If the good trader had too much uncertainty, he will stay out of the market, for weeks or even months if he needs to.
He has a good risk management skills and is not trapped by his emotions.
Make no mistake here: good traders do have emotions, they do have fears, greed, FOMO etc… But when they arise, he recognizes them, and does not let them control him.
They consistently scan what his happening in their mind. When the price drops by 70% and reaches a big support, they may even feel BAD when buying: they are taking risks. But they are aware that their mental pain is due to their animal instincts, and they favour their finely planned strategy over their bouncing emotions.
Let’s be honest: although it is possible to greatly diminish the level of influence that other people opinions have over you, reaching a level of 100% mental immunity against every thing that are being said and heard, is difficult.
That’s why the good trader may choose to isolate himself from other traders, whom (logicless) opinions may hurt his certainty and his plan of actions.
The good trader gave up long ago his emotional ties to a particular coin. He knows that even a wonderful project with the best team ever, can and will have bear markets.
Therefore he doesn’t fear going on the short side when needed.
He’s not going to watch all those red candles going on one after another, without getting some gains from it. Why would anyone watch that passively?
“If you are not aggressive, you won’t make any money. However, if you are not defensive, you will lose all the money you made.”
Although you have to be aggressive with the market to make money, your focus should on being defensive.
Unlike the bad traders, who focus on gaining money, the good trader focuses on not losing it. While of course still opening trade.
This means two things:
Indeed, if you trade and always limit your losses, but not your gains, you are aimed to make money.