Personality Traits of Successful Day Traders - dummies

Personality Traits of Successful Day Traders

Successful traders are a special breed. They maintain strict discipline about how they approach their trading day and what they do during market hours. Not everyone can be a day trader, nor should everyone try it.

Good day traders are independent

If the idea of being in charge of your own business and your own trading account is exciting, then day trading may be a good career option for you.

For the most part, day traders work by themselves. Computers and monitors are relatively inexpensive, high-speed Internet connectivity is easier to get, and many brokerage firms cater to the needs of traders who are working by themselves — all of which leaves the day trader at home, alone, stuck in a room with nothing but the computer screen for company.

Day traders thrive on being alone all day, because it brings out their best qualities. They know that their trading depends on them alone, not anyone else. The trader has sole responsibility when something goes wrong, but also keeps all the spoils. He can make his own decisions about what works and what doesn’t, with no pesky boss or annoying corporate drone telling him what he needs to do today.

Quick-wittedness is a trait of successful day traders

Day trading is a game of minutes. An hour may as well be a decade when the markets are moving fast. And that means a day trader can’t be deliberative or panicky. When it’s time to buy or sell, it’s time to buy or sell, period.

Traders have to have enough trust in their system and enough experience in the markets to act quickly when they see a buy or sell opportunity. Many brokerage firms offer their clients demonstration accounts or backtesting services that enable traders to work with their system before committing actual dollars, helping them learn to recognize market patterns that signal potential profits.

A trader with a great system who isn’t quick on the mouse button has another option: automating trades. Many brokerage firms offer software that executes trades automatically whenever certain market conditions occur.

For many traders, automatic trades are a perfect way to take the emotion out of a trading strategy. Others dislike this type of trading, because it takes some of the fun out of the job. And let’s face it, successful traders find the whole process to be a good time.

Day Traders must be decisive

Day traders also have to be able to make decisions quickly. You can’t wait until tomorrow to see how the charts play out before committing capital. If you see an opportunity, you have to go with it. Now.

But what if the decision is a bad one? Well, of course some decisions are going to be bad. That’s the risk of making any kind of an investment, and without risk, there is no return. Anyone playing around in the markets has to accept that.

But two good day trading practices help limit the effects of making a bad decision. The first is the use of stop and limit orders, which automatically close out losing positions. The second is closing out all positions at the end of every day, which lets you start fresh the next day.

If you have some downside protection in place, it’s psychologically easier to go ahead and make the decisions you need to make in order to make a profit. And if you are one of those people who has a hard time making a decision, day trading probably isn’t right for you.