If you were to study a hundred successful options traders, some traits would undeniably stand out. While some traders may excel in one area or another, most successful traders have a series of traits that set them apart. Whether you have these traits already or are trying to acquire the proper mindset and aptitudes for the trade, here are some of the most essential traits every successful options trader should possess.
A High Level of Discipline
While discipline will help you in pretty much every aspect of life, there is probably no area where this is more important than in options trading. As a matter of fact, you’d be hard pressed to find an options trader who was able to get a long successful run without iron clad discipline. Discipline is an all or nothing kind of trait; you cannot be somewhat disciplined and expect to get consistent results. The good news is that discipline is a trait that can be easily acquired by anyone with enough dedication.
With that being said, you don’t need to be focused 24/7 on trading alone. However, you will need to work tirelessly and systematically towards your goal of improving your performance.
An Ability to Learn from Mistakes
Some of us have difficulty dealing with mistakes. Some people just crumble as soon as they commit a blunder. Some people just can’t acknowledge this and keep banging their head against the same wall over and over again. When it comes to trading, mistakes have a different dimension to them though. Mistakes eventually mean dollar losses, which can be difficult to stomach. As a trader, you should be able to handle a few losses without going into panic mode. Losing money in the trade is inevitable and every trader goes through it. The ones who make it are the ones who eventually reflect on their mistakes and keep pushing. Every loss should be used as an opportunity to learn, sometimes it’s just a matter of slightly tweaking your strategy. Some resources like the Stern Options blog will show you live trade examples so new traders can see how to deal with losing trades.
A Willingness to Learn
Unfortunately, if you’re a poor learner or simply don’t have the patience to go the extra mile and learn as much as you can about options trading, your career in the field will be short lived. Almost all successful traders have an almost insatiable thirst for knowledge and are always looking to either improve on their strategies or look for new ones. Markets are ever changing, and there are always new tricks and trends you can take advantage of. What was working yesterday might not work as well tomorrow and if you’re too stubborn and stuck in your ways you may run the risk of being outdated.
Also, just because you’re into options at the moment, doesn’t need you should only learn about options. The world of trading is incredibly vast nowadays and limiting yourself to just one area could be detrimental. Learn as much as you can about Forex, futures, stocks and bonds, ETFs and any new and hot financial instruments there is out there. The more you know, the better decisions you’ll be able to make with your portfolio.
Ability to Make their Own Decisions
While it’s good to follow the advice of other successful traders in the field, you don’t have to follow them blindly on every trade. Tailor their strategies to your objectives and don’t be afraid to look at other sources information if you don’t like a certain system or strategy. For example, if you’re more of the instinctive type and truly believe you have a knack for reading the news and making predictions, go for it, even if many advisors will advise against it. Some may just not be as skilled as you in that area, so you shouldn’t simply stick to one size fits all formulas because everybody is doing it.
Cerebral Over Emotional
One crucial trait that is essential for every trader is being able to stay calm under the storm and never trade on emotion. Good traders know how dangerous trading with their gut can be and make sure they don’t overreact. Whatever happens, they stick to their trading plan and stay proactive instead of being reactive.
Someone who goes into trades willy nilly will always lose when compared with a trader that goes in with a solid plan. Without a solid plan, you’ll go in without a direction and start making random trades. On the other hand, if you go in with a plan, you are more likely to stick to it and not go overboard. You’ll be able to keep a close eye on your objectives and cut your losses or bank profits at the right time without getting carried away.
Patience is another crucial aspect of options trading. While the world of options can be very fast paced, keeping a cool head and not jumping too soon or exiting too fast from positions can be disastrous. Many beginners make the mistake of cashing in too soon because they’re simply not used to making gains. Successful long term investors, on the other hand, will be more quick to take losses than bank in before stocks reach full maturity.
An Ability to Distance Themselves
While being dedicated to trading may be a good thing, successful traders know the importance of distancing themselves when things are getting too heated. In bad periods, it can be easy to get absorbed and obsessed by the market, but keeping your eyes glued on every ticker 24/7 will do more harm than good.
If you manage to either develop or identify these traits and use them to your advantage, you’ll be one step closer to being a successful options trader. However, these traits alone won’t make you an all star trader overnight. Always remember to keep learning from your and other’s mistakes and make sure you integrate at least of or two of these traits if you feel you’re lacking in certain areas.