11 Desirable traits that make a disciplined trader.
There are so many traders around the world but only a few of them
All things being same, why is it that all are not successful?
What is that special quality or qualification which separates the
successful traders from others?
Do they possess anything that others do not?
Are they all simply born lucky?
Do they get some insider information from companies?
Are they all born millionaires?
Why does this disparity creep into the fortunes of some?
One thing I can say with certainty; neither are they born lucky, nor do
they get any exclusive insider tips or information from any company.
They also, do not have anything special in them. Born millionaires they
definitely are not.
They are, like us, just normal human beings. Then, what is it that
makes them successful?
Here is the simple answer. It is the following that make him a
Here, I am going to describe the 11 habits or rules that make them
2. Suitable Trading System
3. Draw a plan and execute it
4. Position Sizing
5. Willingness to accept loss
6. Records of trades
7. Responsibility for your trades
8. Learning attitude
9. Believe in yourself
10. Review the trading system
11. Play it like a game
Every trader has his clear defined goal or purpose. He knows the
limits of how much risk he is willing to take and how much he
expects to earn.
Your object should be clear and written
down on paper or somewhere else where
you can read your object or goal on a
daily basis. That should form the basis
for all your trading in the market.
Until the time your object or goal is not
clear, you cannot be a great or
Therefore, to be a successful trader, or to be a great trader, your
objective or goal should be clear.
Suitable Trading System
Once your object or goal is clear you have to go for a Suitable
Trading System. Trading systems are:
From the above you have to choose as per your personality. Your
How much loss you can afford,
Or, if on some day, the market
goes down unexpectedly and your
portfolio value goes down by 40 to
50%, will you be able to bear this
much of loss?
If you buy any stock and it is not
giving any movement for some
time, will you be able to hold the
position for a longer time, say for 3 or 4 months?
These are the factors, which you have to consider when you are
choosing a trading system.
Too many traders are hungry to earn money in a short term. They
follow the latest trend of “Day Trading”.
Day trading means that you are living for each day, one day at a
However, this system does not suit all the traders. To be a
successful day trader you have to adjust to the short-term roller
coaster volatility of the market during the day.
You need to have the discipline and ability to handle the stress that
day trading requires.
Yes, there are a number of traders making handsome amounts of
money during day trading.
Here, I would like to give an example of a day trader who made a lot
of money in day trading and, due to that hard-earned money, he
become a main broker of NSE.
He has his own trading system. He used to come to his office at
around 12 noon, study the market for an hour; then, around 1.30
pm he used to make his first trade. He only traded in Index stocks
and in quantity. He would start squaring his position after 3.15
Though this trading system is suitable for him, we cannot say that
the trading system he follows suits all the day traders.
Hence, there are different styles of trading systems for different
Draw a plan and execute it
No trader would survive if he did not go through with executing the
plan he made. If you have no gumption to follow your plan, there is
no need to make one.
A plan makes a provision for an
alternative course of action to be
adopted in case of unforeseen events.
However, it would only work if you were
ready to follow your plan.
Once you have traded, there is no point
in thinking of where the price is going.
Plan about what you will do if the price
triggers your target, or hits the stop-loss point.
If you are taking your decision when the price triggers your target
or hits the stop loss, then you are likely to be emotion less and
You also have to plan for unforeseen events like:
Financial results of large companies,
RBI’s Credit Policy announcements,
Riots, strikes or terrorist attacks,
Declaration of inflation figures,
Industrial Index of Production figures or
Events, or movements, in international markets.
When any of this events occur market’s volatility is very high and
stock price goes ups or down drastically.
Hence, every trader has to prepare himself for events which may
have a negative or positive impact on the markets.
Position-sizing is the most important tool for a successful trader.
Position-sizing is a serious assessment of how much you are
risking on each stock you are investing. That way you can set your
strategy and achieve your goal.
It also means that you assess, beforehand, as to how you will be
able to compensate or recover your losses according to your risk-
It depends on the historical performance of
your trading system for the current market
Position Sizing means:
If you have a fund of INR 25,00,000/-
and you are ready to take risk of 1% of the
fund. i.e. INR 25,000/-,
If the stock price is INR 125/- on which
you make a stop loss of 10%
To calculate as to how many shares you
need to buy to break even:
First divide 100 with stop loss i.e. 10% it
comes 100/10 = 10
Here you are taking risk of 1%of INR 25,00,000/- i.e. INR 25000
So, total stock value is INR 25000*10 = INR 2,50,000
Total shares buy = 2,50,000/125 = 2000 Shares.
Thus, you need to buy 2000 shares.
Willingness to accept loss
You are willing to accept a loss; that
does not make you a loser. If you are
ready to accept the loss only, then you
can trade in the real market.
A trader undergoes a loss because, when
the share price triggers the stop-loss
point, the trader assumes that the price
may reverse from here on; so, he doubles
the position over there instead of a stop-loss ordering him to
Sometimes, he waits for a reversal of the markets and,
consequently, suffers a big loss.
Traders need to take losses as a feedback from the market.
This feedback should be a lesson to him for future trading so that
he may be able to take a proper decision on whether to hold the
position if the stop-loss point is triggered.
He may cut the position after stop loss trigger, or double the
position at stop loss price.
Therefore, feedback serves to educate you as to where you were
right and where you were wrong. It thus enables you to take correct
Records of trade
Do you know how many successful
traders record their trades? Have you
met any successful trader who records
Recording means keeping a written
record of all your trading transactions
in addition to recording if on that
particular day there was any event like
RBI credit policy announcements, elections or announcements of
company results etc.
This enables him to compare today’s scenario with old data.
He can also record if on a particular day he made any mistakes and
the results thereof, if any.
So, today when he takes position, he can be prepared for the worst
scenario and try for some fruitful returns.
Hence, if any trader would like to become a successful trader, he
has to record the detailed transactions of his trades daily.
Responsibility of Your Trades
The successful trader must realize that every action or decision he
takes is solely his, and that, he is the only one responsible for all
his actions and decisions.
A successful trader never blames others for his losses or mistakes.
There is absolutely no place for providing excuses. Mistakes are
bound to happen and you should take a
lesson from your mistakes so that you
never repeat those mistakes in future.
Once you have tested your strategy and
you are convinced that this strategy will
give you good returns, there is no need
to take advice from others or to ask any
When you fail in your strategy, you have to ask yourself, “Did I
follow my rules or strategy strictly?” If the answer is yes, then you
have to recheck your strategy to decide where you went wrong.
Moreover, if answer is no, then you need to have some discussion
with yourself. You have to ask yourself as to whether you followed
your own rules sincerely.
If not, why did you not? Also, how can you stop yourself from doing
From time to time, every trader has to upgrade his knowledge
because on every new day there is something new in the market.
It may be:
1 A new strategy,
2 Algorithmic trading,
3 Equity future Arbitrage,
4 Exchange to Exchange Equity Arbitrage or
5 Delta hedging.
Until the time a trader’s approach is not
inclined towards learning, there is a
possibility that the trader may not be
able to earn as much as he wants to.
Therefore, continuous learning is an
important factor for a stock market
trader, an arbitrator, investor or a delta
Sometimes some rules related to the stock market change; or, a
company releases its final accounting data. You must read it and
understand where the company stands.
That should form the basis of your trading in the market.
Believe in Yourself
You have to have belief in your strategy
while believing in yourself. If you believe
in your strategy, you can make an entry
as per your system, or exit as per your
system; only then will you taste success.
If you do not have belief in your own
strategy or the discipline to follow it,
then there is a chance of losing your
For successful traders their rules and discipline are a priority; the
monetary rewards are secondary.
Your confidence is boosted and you can have a belief in yourself
only after repeated testing of your strategy, rules and frequent self-
There is a distinct possibility of undergoing a loss too in the market
but that is all a part of the game. You have to stick to your rules,
strategy, discipline, entry points and exit points.
This way, you will never lose more than you desire. If you stick to
your rules, strategy and discipline then this market may give you
excellent cash rewards.
Review the Trading System
Every trader has to review his trading
system periodically. This enables him to
take stock of his standing at that point.
If undergoing losses continuously, he
has to reassess and review his trading
system. This could only mean two things:
1 Either he is not following his rules religiously or
2 The current market trends are not favorably inclined towards
the particular category of stocks that you trade in.
Hence, periodically reviewing the trading system is a beneficial
strategy to all traders.
Apart from the strategy, it may be possible that you are trading in
the wrong stocks.
Play it like a game
Follow your rules and strategy with complete belief; forget about
How it is possible and easy, I will tell you.
Use your imagination. It is not your
money you are playing with; it is a game.
As, in sports, all points are recorded as
winning points or losing points, similarly,
every transaction you make is either a
winning transaction or a losing one.
Keeping a record helps you maintain all your trades as winning
trades or losing trades.
That will give you a precise balance sheet of your winning trades vs
losing trades. Thus, you can know how many times you were
correct and how many times you were wrong.
In addition, you know the situations in which you were wrong. So,
whenever that situation or circumstance comes into the market,
you take some precautions and save yourself from big losses.
Similarly, when favorable situations arrive, you trade more and you