Unlock the secrets of highly successful traders with these top 10 trading best practices. Learn the strategies that can elevate your FX game.
- Top 10 trading practices to help you stay ahead
- The importance of being aware of your emotions, having a healthy body & mind, and staying consistent
- The importance of adapting your trading strategy to your goals but also to your risk apetite
Larry Hite is a former hedge-fund manager who helped Mint become the first hedge fund to raise over $1 billion. He is also considered to be one of the pioneers of system trading. According to Larry, there are two habits for winning in trading (and life):
“1. If you don’t bet, you can’t win. 2. If you lose all your chips, you can’t bet.”
Together, these habits embody the contradictory foundation of successful trading. You need to risk enough to win – while protecting your assets against excessive losses. In other words, you need to find the ultimate balance between opportunity and financial safety. After all, one man’s risk is another man’s reward.
We see Larry’s 2 habits of success and raise him 8 more. We will expand on his advice and add some additional trading guidelines that together make up the Top 10 Habits of Highly Successful Traders.
- Plan your day
- Protect your capital
- Positive thinking
- Leverage your emotions
- Healthy body, healthy mind
- Be consistent
- Long-term goals
- Adapt your trading style
- Never stop learning
Plan Your Day
Traders will often talk about discipline. This applies across the board in trading: emotional discipline, personal discipline, and most importantly, strategic discipline. In other words, make a plan (and stick to it). As Benjamin Franklin once said, “If you fail to plan, you are planning to fail!”. No successful traders sit down and open a bunch of trades on a whim every morning. You might get lucky one time, but consistent profits require consistent planning.
Your trading plan will be a set of rules to outline your entry, exit, and risk management for every trade. Traders today have ever more powerful technology at their fingertips: backtesting is a crucial way you can test a trading strategy before you put your money on the line.
Planning your trades isn’t simply a trading plan. Planning can include daily goal creation, tracking your progress in a trading diary, and personally checking in on how much time and money you have available to invest. Get into a healthy routine of waking up early, planning your trading day, and keeping track of your professional development with written metrics. To be successful in your funded account challenge, you could plan your day considering the five top tips in this article.
Protect Your Capital
Risk management is closely intertwined with successful trading. After all, even the most profitable trader is not immune to losses. Avoiding the loss of individual trades should not be the end goal. After all, every single trader, from yourself to Warren Buffett, experiences losing trades. Ideally, you want to get into the habit of exercising healthy risk management to protect your overall capital.
Believe in Yourself
They say that “comparison is the thief of joy.” It may sound cheesy, but you need to believe in yourself to succeed. If you compare yourself to others, then negativity will set in and fear will curb your profits. Get into good habits of healthy positive thinking and self-empowering attitudes. If you believe it, you can do it. Slap that Nike slogan onto your trading attitude and pump yourself up with reinforcing visuals of future success.
Leverage Your Emotions
Psychology and trading success go hand in hand. After all, if emotions didn’t come into play in trading, then automated trades and machines would have long ago replaced humans. There is an intangible, but undeniable value in market emotions. After all, how many winning trades and successful investors were based on gut instinct? That said – excessive emotions can derail your success.
Emotional-based trading must be avoided at all costs: decision-making can be negatively impacted by impulsive reactions and “FUD” (fear, uncertainty, doubt). Leverage useful emotions – motivation, confidence, analytical thinking – but leave pessimistic thinking at the door.
Healthy Body, Healthy Mind
You may be surprised to be reading advice like “stay hydrated” and “wake up early” in an article about trading. However, successful traders exercise good habits both in front of and away from the screen. The life you live away from the markets can influence your success therein. Many successful traders give testament to the power of simple habits such as waking up early, healthy eating, and good hydration.
Early starts: Studies have shown that early risers are happier and more successful. A 2010 study by biologist Christoph Rander discovered that morning people are better able to identify and reach goals and be proactive in their professional life.
Choose the right fuel: Many studies have found links between healthy eating and better productivity. A good diet packed with the right nutrients and vitamins can improve your mental health and sharpen cognitive skills, including concentration and memory. You need to be alert and fit to stay on top of your trading game. Think of the food you put in your body as the fuel that will power your vehicle of success. Go premium.
Hydration: Make sure you stay hydrated and aim to drink at least 8 pints of water throughout the day. Again, the data supports the advice: studies demonstrate that dehydration hinders motor coordination, mental clarity, and decision-making. Given that our brains are 73% water, this comes as no surprise. Don’t let those neurons droop like thirsty plant leaves. Fill up your water bottle and keep the sprinkler on in your garden of success.
As Aristotle said: “We are what we do. Excellence, then, is not an act, but a habit.” Many traders confuse success with individual gains or memorable profits. You do not have to be extreme to be successful – you just need to be consistent. Disciplined trading regularly will lead to accumulative profits and incremental gains. Consistency is the habit of successful traders.
Traders looking to incorporate good practices and healthy habits into their routine may be surprised to know that mediation is included in the Top 10 Habits of Successful Traders. Of course, risk management to limit losses, and technical analysis to identify market trends and spot opportunities are critical to success. Meditation, however, will enhance all trading habits, and train the mind to excel at decision-making, and encourage the clarity to drown out the market noise and spot the areas of potential profit.
Meditation is being increasingly recognized by traders as a valuable tool to improve mental focus, regulate emotions and make sound decisions under time pressure and stress. Trading can be a high-octane industry where traders need to collate large amounts of information. Large amounts of money can be riding on a split-second decision. Through mindfulness and meditation, traders can practice a heightened sense of awareness and help identify and curb negative thought patterns (greed, fear, impulsivity) that lead to poor trading decisions.
Moreover, daily meditation is a proven way to enhance mental health, improve happiness, and reduce burnout. As trading legend Ray Dalio put it: “Mediation, more than anything in my life, was the biggest ingredient of whatever success I’ve had.”
Successful traders must remember to keep long-term goals in mind. Thinking ahead is crucial to help traders avoid impulsive and short-sighted decisions. Trading is a fast-paced industry where a lot can be riding on a single trade. In this environment, it can be easy to focus only on short-term gains (and potential losses). Getting into the habit of thinking long-term will help you take a more rational and measured approach to your trades and keep your eyes on the prize even amid a storm of short-term losses. Focus on the long-term goals, as Shelby M.C. Davis put it: “Invest for the long haul. Don’t get too greedy and don’t get too scared.”
Adapt Your Trading Style
In successful trading, there is no “one size fits all.” Everyone is different, and a strategy that might work for one trader may not be suited to a different personality type. Develop a trading style that is aligned not only with your own goals, funds, and time but also with your appetite for risk and tolerance for loss. Invest not just in the markets but in yourself: leverage your unique personality and get into the habit of finding a trading strategy and approach that best suits your individual needs.
Never Stop Learning
Even the most successful trader doesn’t know everything. As human beings, we are fallible and capable of error. The markets, like the world, are constantly changing, and if you want to succeed as a trader, you need to recognize your knowledge gaps and strive to continually educate yourself. Your ability to retain an open mind and allow for new possibilities will be the best indicator of success in constantly evolving markets. The famous philanthropist George Soros once said:
“The financial markets generally are unpredictable. So one has to have different scenarios… The idea that you can actually predict what’s going to happen contradicts my way of looking at the market.”
Never Underestimate the Power of the Markets to Surprise.
Adopt these Top 10 Habits of Successful Traders, and you will boost your profits and watch yourself grow in the professional and personal sphere.