I recently wrote about one options trading errorI did years ago and the lessons I learned from that experience. You can improve at trading and investing, and let’s be honest, in most other things in life if you have the diligence and courage to practice, overcome tough times, and learn from your mistakes. Becoming truly exceptional at something as difficult and psychologically stimulating as investing in the stock market, day trading, or options trading can help you become a better human being in general. It influences how you view the world and how you interact with others, but more importantly, it strengthens you emotionally and psychologically.
When your real money is at stake and you lose some or a large part of that money, it hurts. In this article, we take a look at what it means (and what it takes) to be an exceptional trader.
The Character Traits You Need To Be An Exceptional Trader
I will focus this discussion on character traits rather than specific skills. Almost any skill can be learned, and the skills you need to master to be a successful options trader may be different from being a day trader or long term long (LTBH) investor. Trading skills are things like being able to read a chart, knowing the mechanics of executing a trade, or being able to read and understand a public company’s financial statements and SEC filings.
You may already have these traits as part of your mental makeup, or you may need to work on developing them. These character traits are similar no matter what type of trading you are doing, and some of them will help you learn or hone the previously mentioned trading skills.
I list discipline first because it is both the most important and the most difficult trait to acquire, maintain and maintain over the long term. First of all, you need discipline to learn the business skills you need to be successful. If you don’t make the effort to study and learn, you won’t learn (no surprise here) how to trade successfully. There are no shortcuts here. Don’t just read the shallow introductory, “do this and get rich daytrading” articles and call it a day on your learning.
Without a solid understanding of the markets you trade in and the strategies you use, you will ultimately fail. In this case, it is better if you fail and quickly lose all your money, as the alternative is that your false sense of confidence and your exaggerated sense of skill and knowledge might lead you to trade larger or larger amounts. of your capital. What you will certainly end up losing. It’s better to lose early and small and get out quickly than to lose big later if you don’t have the discipline to learn your trade.
Discipline is really essential once you start actively trading. Whether you follow the recommendations of an advisor or create and implement your own trading strategies, you must have the discipline to adhere to your self-imposed rules and guidelines. This can be extremely difficult in the heat of the moment, even more so when there is high volatility in the market and prices move quickly for or against you.
Psychologically, it’s easy to get carried away by the moment. For example, let’s say your rule is that you will exit a day trading position if it drops 3% or more during the day. Shortly after entering the position, the stock drops 3.5%. Your own rule says to get out, take the loss and move on, but mentally, it’s hard to accept such a quick (and potentially large) loss. So you break your own rule but you rationalize that it’s only for a little while, to “give it time” to recuperate . Remember this is a rule you created .So why don’t you adhere to your own carefully thought out rules? Because you don’t have enough discipline in the face of a very natural emotional reaction. Of course, the stock could recover. But that could also drop by 10%. Hope is not a strategy. You create trading strategies and the rules to implement them, for a reason. It’s great, but then you have to have the discipline to stick to them, good or bad.
Exceptional traders demonstrate exceptional discipline. If your policy or rules aren’t working, you can adapt them based on the data (see Adaptability below).
However, patience is a state of mind and is not directly tied to a specific period of time. You can be patient in an open trade at the seven minute close, just as you can in an options position that uses LEAPS that expire in two years.
Likewise, sometimes you need to have the patience to wait before entering a position. For example, your strategy might be to sell options just before a company’s earnings call when volatility is at its peak and option premiums are high. In the days leading up to the earnings report’s release, you watch the stock price move and can’t wait to get in. To maximize your potential profit, you decide that you should enter the position just before the market close on the profit reporting date. the report is after the bell. It can be difficult to wait, especially if the stock price is already moving in the direction you expect the report to move it more info to visit: more info to visit: http://liveblogcenter.com/