Core Traits of Successful Traders

08/18/2011 4:15 pm EST


Darren Miller

Founder and CEO,

Even the best trading plans would fail if those trading them didn’t use discipline, one of the key traits of successful traders. Darren Miller reviews this and other important psychological aspects.

What makes a good trader? Let’s ask Darren Miller. Darren, what’s the most important personality trait of a trader?

I think if I were forced to choose one, probably self-discipline. I focus on the five-factor model of personality, and one of the factors is conscientiousness, and inside conscientiousness you have six facets, one of which is self-discipline.

Not only in trading, but in life in general, self discipline is key to becoming successful at anything. If it’s a diet—how many of us have tried to lose weight—it boils down to self discipline; are you able to monitor your calorie intake, things like that.

When it comes to trading, you can have the best-laid plan, you can have the perfect set-up, but if you’re not disciplined, you’re not going to be successful.

You may take too much risk; you may trade at an inopportune time. So being able to monitor yourself, to have the discipline to say “You know what, I woke up late today; I’m not sure why the markets are where they are; I need to take a break.” Fire yourself, so to speak. 

Come back the next day, spend that day doing some research, some homework, maybe read. Catch up on other things that are going on around you and show that discipline. Be able to make a more informed decision the next day.

What other factors, Darren, other than discipline?

I think if you were to add on to discipline that you would want to focus on not feeling forced to trade. I know that some people feel that if they’re not in the market, they’re not making money, and so they feel that pressure, and it’s undue pressure. 

A lot of people approach the market and say, “I need to make X number of dollars a day to replace my income,” and so they build on that force and put that undue pressure on themselves to be a profitable trader, and then you start to see trades being forced; low-probability trades.

Your broker’s happy, they’re making money, but at the end of the day, your profit and loss is probably less than favorable because you forced the trades that just weren’t there.

And that you’re focusing on the profit. How about focusing on the risk side?

Yeah, you definitely need to focus on the risk; it’s one of the most overlooked factors for a lot of people. 

You’ll see a lot of that in currency markets with the leverage; options markets the same way. If you don’t define the risk, you never know how much you can lose. 

See related: Be Smart When Using Leverage

That’s unhealthy trading behavior, and you’ll walk away from the market jaded and broke.

Any other piece of advice that you could give us?

I think it’s important to not try to know everything. Don’t feel that pressure. 

It’s okay to focus on a specific sector. It’s okay to focus on a specific strategy and to become a master at that.  You can be profitable in the market by doing so, and really, keeping it simple.

The market is difficult enough as it is, and oftentimes if we’re able to focus on one or two aspects and make money there, we should stick with that and become a master.

See video: Make One Market Your Specialty

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