WHAT YOU NEED TO KNOW ABOUT MASTER TRADERS – PART 7
“Of all of the lies my traders tell themselves, the one that shows up the most frequently is “I don’t think I can do this.” – Louise Bedford
Name: Toni Hansen
Occupation: Full-time trader and mentor
ADRRESING THE TOUGHEST TRADING QUESTIONS
A respected technical analyst and full-time trader with decent profits from weak and strong markets, Toni started her career as an equity swing trader, after which she mastered other types of financial markets. She has crafted ways to tackle stocks, futures, options, ETFs and Forex, surviving uptrend, downtrend and equilibrium phases in the markets.
She’s spoken at many trade shows and expos. She’s contributed to Real Money Pro, CME Group, Active Trader, Money Show, Trading View, etc.
Toni has always traded and coached many professionals in various fields of financial industry, including other people outside the financial industry. She quotes other great traders in her writings.
Please check her website. Tonihansen.com is rich with very helpful trading articles, insights, lessons and courses, which can help beginner, professional and advanced traders. For example, you can get a one-stop shop for in-depth lessons on introduction to technical analysis, candlestick charting, trends, indicators, fear and greed, money management, advanced courses on trends, various ways of determining resistance and support, Fibonacci levels, market reversals, selecting your trading style, and so on.
Giving answers that work, Toni has also made bold attempts to address the toughest questions in trading, such as:
Which type of market analysis will I employ?
Which markets should I focus on?
Which strategies should I use for trading?
Which time frame should be my primary focus? Etc.
What You Need to Know:
In order to have a taste of insightful tips and lessons Toni has to offer traders, please read the article below. The article was taken from her website and the link is located at: Tonihansen.com/trading-lessons.html#traits
8 Traits of a Successful Trader
The market is an ever-changing entity, each day presenting us with different and unique scenarios with no two days every the same. Nevertheless, the market is more or less a reflection of people’s ideas and attitudes and while it is also true that no two people are alike, each and every one of us has something in common with someone else, whether it’s the way we get out of bed in the morning or the foods we prefer to eat. Additionally, we tend to repeat actions, such as preferring to brush our teeth at a certain time of day or making sure we try to catch the Thursday night prime time television shows. No matter which angle you look at it from, humans are creatures of habit and this tendency gets reflected in a security’s price movement. It’s what makes technical analysis a reliable and profitable method for analyzing the market.
Unfortunately, technical analysis is not always cut and dry. The same core pattern does not work the same way in every market environment. For instance, one of the setups I often look for on a daily chart is a 3-5 day pullback in an uptrending stock for buying opportunities. Where newer traders tend to get in trouble, however, is taking such a setup to mean that every time an uptrending stock pulls back 3-5 days and then breaks the previous day’s highs that it means they should buy it. In reality, there are always exceptions and its learning what these are that can be the dividing line between those traders who are successful and those who fail. In this example, how a security pulls back in a primary uptrend, as well as overall market conditions, will greatly influence whether taking such a pullback as a long is really worth the risk to reward. In some cases it is not.
The ability to adjust to changing market circumstances is just one of the traits of a successful trader. In truth though, there are quite a few. Over the years I’ve mentored quite a few traders. Many succeeded, but many of the traders I have spoken with over the years have failed. I have observed a number of traits which are present in those who succeed. Some of the top traits of successful traders are as follows:
- Staying Neutral
You’re probably wondering away just what do I mean by “staying neutral.” When you are chatting with your trading buddies online or reading a message board and all you hear are how the market maker or specialist is out to get them, or how one minute they are a market god and the next they have what is certifiably the worst luck in the entire world, then you are dealing with a trader that is NOT staying neutral! They are letting each trade or each trading day rule their emotions and this pressure builds upon itself, making it very difficult to succeed.
The professionals don’t let the day to day oscillations in their accounts faze them. The results of one day of trading, or even a few weeks or a month are not as important to them as the average over time. Among most of the professional traders I know, you cannot tell by their mere appearance whether or not they had a great day in the market or if they lost. Sure, they may tell you one way or the other.
We are not robots devoid of all emotion after all, but when we leave the market for the day after a difficult session, we are able to disassociate it from the rest of the world and don’t spend the rest of the day complaining or moping around the house thinking that entire world must be out to get us. Similarly, on a great day, we do not call up every person we can think of and tell them how we rule the market universe. Extreme emotional responses either way will often lead to greater difficulty in the market since emotions take over from reason and can often override it, making it difficult to remain objective.
- Have business Plan
Most successful traders also have a business plan. As in any other profession, it’s important to know what it entails in order to succeed. As in any business, this consists of a set of rules or guidelines to help keep the trader on track and from making decisions purely on a whim.
Would you open a restaurant without a plan? No, or at least I really hope that you wouldn’t! A new restaurant owner must take into account the type of cuisine they wish to serve, the décor of the restaurant, the hours of operation, to whom they are catering as clientele, etc.
As in the restaurant business, traders must also have a business plan. A partial list of the questions you should be asking yourself and including in your trading plan are as follows:
How must time will you spend study and trading?
What techniques and strategies you will focus on?
What are the expenses involved in becoming a trader?
What is your maximum loss limit, not only per position, but on your account as a whole?
What are your objectives?
The more comprehensive your plan is, the better. You can always go back and change it, modifying it to suit your development as a trader. I find that it is very helpful, for instance, to go back and read over my techniques and goals whenever I am in a slump and my progress has stalled. It helps me maintain the right frame of mind so that I can push forward.
- Keep a Journal
One of the first questions I ask any of my new clients is whether or not they have a trading journal, and if you, what does it consist of.
Most traders don’t even have a journal. Those that do have one typically keep it in a spreadsheet format. This offers very few insights into a trader’s personal style and strengths and weaknesses. Some things to consider when developing a trading journal are:
What techniques were used in locating the position?
Did you follow your entry, stop and exit criteria?
What pros and cons did the setup have?
What, if anything could you have done better and what are you most proud of?
It is also important to print out a chart of your trade. Mark both the entry and exit on the chart. If necessary, print it out on several time frames to show the details of the position.
- Focus on Several Techniques that Work Well
Let’s take a minute to look at a typical college student. What kind of person majors in general studies? Unless they go on to focus on a specific occupation in graduate school or law school, etc., well-paying jobs will be hard to find for most of these students upon graduation. Instead, for those who focus their studies in one field, and more specially, one subdivision of that field, demand for their skills will be much higher. If you focus on just a few techniques, it allows you to really become an expert on the technique you are using. Great traders have several strategies that are their bread and butter plays and they will focus on them for as long as the market conditions favor them.
Remember: The jack of all trades and master of none is usually a low-paid, unskilled worker.
- Being a Great Money Manager
Great traders are also great risk managers. They respect the risks they are taking and on each trade they risk a small amount of capital. Usually this is 1/4% to 1% per position (and no more than 2%). The idea is that you can’t trade tomorrow if you blow out today and if you can’t trade you won’t be a great trader, now will you?
Great traders protect their accounts. It’s their baby. Each position is so small they don’t really care what happens with it. It’s just a nick… win, lose, or draw. So, if they have a 200K account and are risking 1/4% on each trade, if they take a stop they are out $500. That’s a very small amount of money compared to the account. They can take a couple of hits and still be in the game.
- Being Comfortable with Risk and Uncertainty
The sixth trait of great traders is that they are comfortable with risk. Let’s face it, trading is certainly risky and if you are afraid of the risk you won’t last. If you are afraid you will lose money, then I can say with near-certainty that you will.
Great traders are comfortable trading a pattern that is not a 100% sure-thing, because there simply is no such thing. Many new traders have a terrible time with this: the uncertainty of a trade, but you must overcome it. It is very easy to allow yourself to become frozen with fear over the risks and uncertainties of trading. Great traders get beyond it.
- Accepting Personal Responsibility
Great traders accept personal responsibility for everything they do, even to an extreme. If I loan you $100 and you never pay me back, then yes, perhaps you are not a very honorable person, but I also made a poor choice to lend you the money in the first place. I made that choice, however, and I must accept personal responsibility for that action.
The same concept applies to trading. Many traders, lacking the expertise and confidence to make all their own decisions to begin with, will rely upon others for advice. The input may come from CNBC or it may come from a newsletter service or trading chatroom or message board. It doesn’t matter where you get the original idea from, it is still up to you to implement it or not and you have the due diligence to stand behind your decisions and make them your own, whether they succeed or fail.
- Using Risk Capital to Trade
Finally, great traders use risk capital. This should be obvious. They trade with money they can afford to lose. It is very difficult to trade well if you are worrying about paying your mortgage or putting food on the table. I’ve also seen a number of traders over the years take out equity loans to open a trading account. You are supposed to be limiting your risk and outside stressors, not adding to them if you wish to succeed. If you think you can be one of the exceptions, then you should really think again!
Trading with risk capital frees up your mind. It lets you trade and not worry about every little stop you have. You can just focus on trading correctly instead of trying to force yourself to meet certain financial needs. They say scared money never wins. Well, I have yet to see a person who has no other source of income or savings make a living off their $5,000 trading account.
Many of these traits may take a bit of time to acquire. Overcoming the fear of loss, for instance, haunts many, but by focusing upon these traits and characteristics, my hope is that you may model your own frame of mind to those who have come before you and have made the leap to a successful and long-lasting career in the markets. It is said that the majority of successful people in the world became such by following in the footsteps of others, their mentors. Even if you do not have one specific person in mind, familiarizing oneself with the traits of those whom have succeeded before you is a great place to begin!
Conclusion: Many traders have dreams but they don’t act on those dreams. Even when they act, it’s usually one or two attempts, for they give up quickly as soon as they run into difficulties. As far as they’re concerned, there’s nothing like persistence. They think successful traders are successful only because they’re lucky to have easy methods of profitability. NO. Ask successful traders, and they’ll tell you how long or how many years it takes them to achieve consistency in the markets. They’re not luckier than you: they’re only more persistent than you.
This piece is ended with a quote from Toni:
“Knowledge is power. This is as true in trading as any other area of life. Those who don’t know will eventually give their money to those who do know. In this industry we have 90% of the money going to 10% of the players. Do you want to be part of that 10%?”
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