Four Overlooked Qualities of Successful Traders

One of the things I most enjoy about working with traders in various settings--prop firms, hedge funds, and investment banks--is the opportunity to see how successful traders actually succeed. I'm constantly amazed at the variety of strategies and skills that can be joined to create profitable approaches to trading and investing.

During this most recent road trip, four characteristics of successful traders--ones that are commonly overlooked--have jumped out at me, and I thought I'd pass along:

1) The Constant Desire to Improve - I met with a group of traders who have been successful over a period of many years. Nevertheless, they were participating in day-long meetings, including a seminar with me, to build on their success for the coming year. It was very clear that they are continually searching for new opportunities and strategies. They also value continuing education, keeping up to date with what's happening in their areas. They track their performance and, individually as well as a group, are setting very specific goals for improvement.

2) The Ability to Press Their Advantage - The really good traders are aggressive; no doubt about it. When they're seeing the market well and have good ideas, they aren't shy about using their size and pressing their advantage. Lesser traders are very quick to take profits and are risk averse re: losing those profits. The very successful traders keep their risk management, but don't hesitate to become more aggressive when they see opportunity. They remind me of boxers who, seeing opponents hurt, will go for the kill. The less successful traders seem to lack that killer instinct.

3) Emotional Resilience - The very successful traders have a great attitude about losing. They know it's going to happen. They don't take it personally. If anything, they try to find learning experiences from losses. Elsewhere I have written about how good traders view a losing trade as "paying for information". A trade with an edge that doesn't go their way either tells them something important about the market, or it tells them something about their execution. Either way, it's a potential learning experience. Resilience means that the excellent traders trade well out of a hole. They can be down money for day, week, or quarter and continue to make the same good trades they would normally make.

4) Creativity - We normally think of creativity as a trait that belongs to artists, but it also is quite noticeable among traders who have been successful over many years. They find edges in the most unlikely places. They look at interesting relationships within the market they're trading, and they find unique relationships from one market to another. One trader very recently told me of a strategy that exploited the way one market was priced related to a similar market at certain time periods. I would have never thought of that idea in a million years. He was making consistent money from the concept.

As I write about these four qualities, I'm struck by how they also can be found among very successful athletes, entrepreneurs, and performing artists. When you're a career trader, you truly are an entrepreneur, running your own business. Many of the same enterprising qualities we find in the business world are present in spades among excellent traders.