Becoming a Successful Trader — Common Myths II

Because of influence from social media and also human nature itself, there are many myths in investing and trading. In fact, there is no absolute right or wrong in many things. It is true that independent thinking after rational understanding can avoid falling into many trading pitfalls.

Try to read the market

Many people try to interpret market conditions after the fact, and often divide the market into various types of situations because of this. It is necessary to review the performance of the strategy based on the market afterwards, but too much self-seeking of reasons to explain the market is often reduced to pure self-comfort. Thus, it is easy to hinder one’s own progress. Only rational analysis and attempts can turn past experiences into useful ones. Excessive explanations are not helpful.

How to review your strategies

• Observation and definition: don’t just blame the market for strategies losing money or underperforming. If you think that a certain market is not suitable for your strategy, the first thing to do is to try to define the market conditions in your own ways. Based on your own observations of the market or phenomena that have occurred, you can categorize markets with data and indicators, such as ATR, trading volume, MACD, RSI, or other data and indicators that can be digitized during this period.
• Research and backtesting: conduct backtesting in the market that you define, and observe the performance of the strategy in the past under similar or identical market conditions, and inspect whether there are any unsatisfactory situations. Break down the previous data-based definitions of markets into different types and combinations as much as possible. Through backtesting and observation, find the situation where the strategy performed most poorly in the past.
• Attempt and modify: if you find that in the defined situation, most of the strategies do not perform well, you can try to modify them. Whether it is adding a filter for strategy entry, modifying the way the strategy exits, or adjusting your parameters, as long as it can make the strategy perform satisfactorily during this period, it is worth trying.
• Trade-offs and choices: finally, all modifications or additions to the strategy will affect the final overall backtesting performance. In many cases, the overall performance is not as good as it was before. At this time, traders must make trade-offs and choices. Accepting adjustments in the hope that the strategy will run more smoothly in the future, or correcting one’s mentality in the face of adverse market conditions in order to ultimately achieve better performance, are all steps for traders to improve themselves.

The market will not always be satisfactory. Finding reasons to comfort yourself or finding ways to improve yourself will have completely different results for becoming a better trader.

Trader’s personality trait

Many people think being a trader is a unique profession. There are also many people who want to be a trader but think that they have no talent. In fact, most of the needed traits that everyone thinks of a trader can be achieved through acquired efforts, and many of them are not as difficult as everyone thinks.

Facts about those successful traders:

• Requires high IQ and good education: in reality, education and IQ has no absolute relationship with becoming great traders. Many people with high IQ also have high self-confidence, and cannot humbly accept the opportunity to learn, which stands in the way of progress.
• Need the right personality: although many books often mention the characters of a successful trader, there is absolutely no character that is not suitable for becoming a successful trader. The important thing is to first understand one’s own personality, then use the advantages and avoid the disadvantages of that personality in the process of trading.
• Aggressive and self-aware: the truly successful traders are humble. They know that rational analysis and patience are the key to success. They don’t let their ego influence their trading decisions.
• Cold-blooded and emotionless: successful traders are not without emotions, but they can separate emotions from rationality and not let emotions affect what they should do. How to control trading emotions is one of the biggest issues for traders.
• Seize every opportunity: losing money is definitely a common occurrence for traders, but successful traders are not obsessed with the current trading results. What they value is how to control what they can grasp, lay out good positions to wait for opportunities, and create long-term profits.
• Ability to predict the market: the biggest reason why traders are successful is not their ability to accurately predict the market, but their stringent risk control and strong psychological quality. They can make the most out of favorable market opportunities that suit them the best, and reduce losses at other times.

No one is born a great trader, and while there are certain personality traits that favor trading, only lots of hard work along the way make them continually successful.