Successful traders have many remarkable characteristics. However, one of the most critical elements to success is a constant appetite to reach self-improvement goals and take your craft to the next level.
Some traders, in fact, most, will treat trading as a hobby, using it to scratch a particular itch of risk and fantasy. This enables them to dream of reaching admirable financial goals, while in reality, their limitations will not make it feasible for them to ever go to that next level.
In other words, there is a crucial distinction between those who trade as a hobby and those who trade for a career.
Don’t Be Too Hasty
Now, let me stop here before I continue. I must affirm that not everybody needs or desires to turn trading into a career. For some, a hobby is all they need. If this is you, I celebrate that and encourage you to have a responsible and good time with your trading
However, financial markets tend to appeal to self-starters and entrepreneurial types – those who can see the value and opportunities of the craft and want to discover their potential.
If you have considered taking your trading to the next level – turning your hobby into a career – this article is especially for you. Meanwhile, if you want to be more successful at your trading hobby, you will still find helpful tips in this article.
Before I dive into a list of things to consider, let me first say that my experience is relatively broad. I interned for a well-known bank, traded commodities for an agri-business hedging operation, worked with some traders that are household names in the industry, and contracted with companies that target retail traders for education and networking. So I’ve been able to observe much over the last 19 years.
More importantly, I’ve seen many traders who were able to trade for a career and largely be able to answer to themselves. Today, I’ll offer a synthesis of the material I gathered from these career traders.
The most successful traders I’ve known live balanced lives. In contrast, the traders who tended to be the flashiest in terms of persona and image were often the ones who had distorted trading returns.
In this group, the ones who would party hard would frequently have the most challenging losses. On the other hand, career traders who had successful long-term results were the ones who weren’t characterized by any forms of extremes. Instead, they lived with a level of equilibrium in all areas of life.
Furthermore, their account returns were also balanced. These traders did not have significant winnings and losses but maintained standard steady returns. If you want to become a career trader, I believe this is a key virtue.
I’ve never observed a long-term successful career trader who lacked a routine. They didn’t have to be the most programmatic people; however, very little was random in their life. This is connected to the concept of balance. They awoke each day at the same time and went to bed at similar times each night. After observing them, you had a good idea of what and where they would eat and what clothes they would wear. There was hardly any guessing about them.
Obviously, this lifestyle of routine translated into their trading. Nothing was random for them, and when they approached the markets, they didn’t attempt to reinvent the wheel day in and out. Instead, their approach was sticking to a routine.
An evident and crucial pattern is developing here between balance, routine, and discipline. Notice I have not yet addressed anything specifically about trading, indicators, and systems. Instead, these personal temperaments, according to my theory, will have more to do with a trader’s long-term success than any market approach or platform.
Career traders live disciplined; that is why they wake up every day at the same time, go to bed on a schedule, and keep themselves healthy (see Healthy Lifestyle below). Moreover, this translates into their trading. Rather than taking a swing and miss at any pitch that looks near the strike zone, they wait for the right pitch, the near-perfect opportunity, and swing with great form. It may be less “sexy” taking only a single trade per day rather than 8-12, but their discipline enables their precision.
Career traders who maintained success were healthy in a variety of ways. Good health permitted them to be free of distractions. Their relationships were healthy, and their homes and workspaces always seemed to be clean, neat, and tidy enough. Additionally, I’ve noticed that successful traders under fifty years old tend to have a healthy diet and exercise lifestyle. Equally, if not more importantly, career traders will maintain mental and emotional health.
One day I’ll expand upon this section, but I couldn’t tell you how many times otherwise good traders became distracted because they did not tend to personal health. In contrast, I know at least one great trader who visits a therapist weekly, not because there is anything clinically wrong with him, but to ensure he maintains a healthy mental and emotional balance.
Some equate routine and discipline with being rigid. While there is some overlap, being balanced means knowing when to hold fast to a fundamental idea and when to change one’s mind and adopt new perspectives.
The most rigid, inflexible traders I know end up making significant mistakes. Why? Because, among other things, they refuse to admit defeat. One otherwise excellent trader would destroy months worth of gains because he would adopt a thesis, and in the rare case he was wrong, he didn’t know how to admit it. While one need not be overly flexible, having some degree of flexibility is another critical aspect of becoming a career trader.
Here’s The Actionable Stuff
Now that we’ve examined a few personality traits to develop for career trading, let’s take a look at some tangible factors.
The topic of capital applies to both trading capital as well as personal reserves. One huge mistake traders make is underestimating the amount of money they need to trade full-time. Perhaps in an adjacent article, I’ll expand on this idea and discuss how much is enough in more precise terms.
However, an introductory guideline is that you need enough to be able to suffer drawdowns and to be able to rebound without having to generate extraordinary returns. Furthermore, it would be best if you had enough to where you could earn a living with modest percentage gains on a monthly basis.
There will be months when you break even, or even worse, when you lose money. So, you’ll need capital reserves that allow you to maintain your balanced lifestyle and pay your bills without further depleting your trading capital.
Look For Proven Results, Not Outliers
One mistake I’ve seen many traders make is that they quickly want to jump in and go full-time into trading when they have an exceptional month or two.
I knew one trader who quit his job after a single month of exciting profits. I’ll have to share the harsh learning experience of this guy in another article. However, a productive guide is to add a moving average to your average monthly returns over 24 months, or more, and then develop standard deviations. This, then, serves as a barometer for longer-term success. If you have a two or greater standard deviation beyond your average profits, that is fantastic; but chances are, you will revert to the mean.
Don’t let a single exceptional month or quarter fool you. One question to ask yourself when deciding if you are ready for a career is this: Is your average monthly profit enough for you to pay your bills, adopt the lifestyle you need, build your personal savings, and also increase your trading account? If not, you need more funding, better results, or both. If your answer is yes, then ask yourself, can you take a loss of one standard deviation on your average monthly winnings and still live comfortably?
One primary point is that a long-term, successful trading career is not about your big months but about a process of tried and true performance that gives you the confidence to earn a modest percentage return on your trades, keep your losses smaller than your gains, and be able to statistically maintain an edge for years to come.
Are You Proven In Fast and Slow Markets?
With every trending market, new trading heroes arrive who masterfully ride a nice wave. However, when the wave breaks, they have no idea what to do next. Some traders can trade a slow, choppy, range-bound market with precision. However, with increased volatility, they struggle significantly. In contrast, others can trade the fast markets, but they suffer tremendously during times of slow trading.
To go from hobby to career trading, one needs a proven model of surviving each market period and demonstrating profit during these seasons. This kind of profit maintains a lifestyle, increases savings, and adds to the trading account value after withdrawals are factored in. If you have not reached this status yet, it’s perfectly alright. However, this gives you an idea to work on.
While these eight items hardly constitute a comprehensive checklist to determine how and when you are ready to jump into full-time trading, it still provides good food for thought. For example, suppose you chart your own mental, emotional, and trading development as you do the markets. In that case, it will give you indicators that will serve as a good barometer for where you are in the process of becoming a career trader.
Remember, few are able to achieve that dream, and to reach it, one must work. Self-improvement must be continuous and ongoing. However, if these items are taken seriously, then you have a roadmap toward success. Until next time, trade well!