The best habits of successful traders

That’s is precisely what separates wheat from the chaff, a habit. Everyone who is trading today has for sure read a lot of content from renowned authors or watched hundreds of hours on video streaming platforms to hone their trading skills. But how many of them are consistently building wealth?

 In spite of learning from same content which is accessible to everyone (Considering you know the authentic sources), barely less than 1% of traders make consistent returns.

Why? The reason at the core is consistency. Sticking to a routine like a military precision. We get bored pretty often, and living in world which has data overload, we tend to switch to better ways. The FOMO catches up fast and we switch from a newly learned technique to newer one in hope of greener pastures.

We at Adwizon,  wanted to understand this in detail and bring to you a basic rule book to stick to. We spoke to some successful traders in and around India to figure out what differentiates them from the rest?

Is it the techniques they use? Is it about the markets they operate in? is it about the instruments they trade in? or is it something else? We are sure you will be surprised with the results; it is none of these. It is about the habits they have developed over the time.  Some habits which were initially very hard to implement and stick to but eventually became what is called as “Procedural Memory”. Now these habits are so ingrained in their processes that they don’t even realize doing it.

So what is procedural Memory? Procedural memory is a type of long-term implicit memory that involves the performance of certain cognitive and motor tasks without the conscious retrieval of past information (Lum, Conti-Ramsden, Page & Ullman, 2011). It is the memory for skilled actions, such as how to brush your teeth, how to drive a car, how to swim the crawl (freestyle) stroke.

In simple words, memory we develop by repeatedly doing certain procedures. These memories become part of who we are and we execute them automatically thus making sure same results are delivered again and again and again.

During our conversation with traders from different geographies and time zones, while we were understanding their habits, we discovered that there is a common list. The habits which are all common in between them. Through this blog, we bring to you the set of most common habits of these successful traders and many more around the world. Here is the list:

1. Trading Diary:

   As they say “What gets measured gets done”, all of these traders measure their success by monitoring minutest details. They maintain a log of their trades, there were slight differences in the data they capture but more or less the essence remained same. Everyone captured their daily trades with details like entry price, stop loss, money made or lost and some more. Most of them captured this in an excel sheet, while some had custom software to take care of these details and they could pull up anything they need from a dashboard.

2. Do their homework well:

   All of them have made a rule book, which is converted into multiple sections, like a scan followed by a strength of the pattern and finally a list ready before they trade. Each trade has been detailed well enough before the actual trade happens. Like they know their position size, they know how much are they risking on a given trade and how much position are the exiting at what price point and what if the moment doesn’t happen? How much do they wait? All of these are detailed to last mile to make sure there are no surprises and they are completely ready for what their market has to throw at them. If for someday they missed doing their homework, the trade doesn’t happen on gut, there is no trading that day. If nothing qualifies in their criterions, no trading happens either.

3. Emotionally Disconnected:

   We were surprised to see how all of these people are completely emotionally disconnected with their trades irrespective of the size of trade. To put in words of one of the traders, we were speaking to, “It is like performing surgery on your family member, you can’t be doing that emotionally, you have to do it robotic precision for best possible results”. We broke it down even further to understand this in detail. Without thinking about the potential profits or actual losses, they execute a trade if a stop loss is hit and once the trade is closed, it is not monitored unless it pops up on a scan again.

4. Have majorly 1 max 3 patterns they trade in:

   They don’t trade in each and every set up in the book, instead have mastered one to three patterns to trade. They don’t check anything else, anything else doesn’t matter to them.

   Like they say, “I don’t fear a guy who knows 10,000 kicks, but I fear a guy who has practiced 1 kick, 10,000 times”. The precision with their patterns is such that they can execute them half sleep as well, Pun intended!

5. Engine calibration based on data:

   They collect all the data possible on their trades and evaluate what went wrong and what modifications (if needed) do they need to make. This has helped them build precision in their process and hence a robust engine.

   We are sure these habits are enlightening to you as much as they were to us. However, the trick is in inculcating them in our trading routines to derive similar results. The process should be strong, results will follow.