What Makes a Great Trader?

Becoming a trader is easy. Open an account with a broker of your choice, and dive right into the exciting world of financial markets. Becoming a good trader, capable of making stable gains and relying on trading as his primary source of income, however, is much harder. What is the difference between the two and what qualities do you need to develop in order to call yourself a great trader?

Jack Schwager, the author of “The Market Wizards” book series, seems to know a lot about successful traders, their career paths and life choices. According to Schwager, a trade is someone who has no long-term bias and, therefore, is as eager to go short as he is to go long. In other words, a trader will trade both bullish and bearish trends. Secondly, a trader will change his position more often than a long-term investor (say, Warren Buffett who believes it is long-term deals that make you rich). A trader, according to Jack, is someone who constantly makes decisions. An investor can say “Well, I want a third of my money in equities, a third in bonds, and another third in cryptocurrencies (or whatever) and keep all that for at least 10 years”. This is not something a trader is expected to do.

A lot of novice traders believe there is a single winning strategy most experienced traders use. Nothing could be further from the truth. There is no single strategy that will work perfectly 100% of the time. And even if there was, imagine everyone simultaneously using the exact same strategy. Does it sound like a good idea? Hardly.

What trading strategy should you employ, then? Well, that’s the question every trader will have to answer himself. Your personality, as well as your trading style and experience you get while trading will shape the strategy you use. Some traders, like Jim Rogers, rely mostly on fundamental analysis. Others, like Martin Schwartz, made their fortune as technical analysis experts. It could even be that if the two switch sides and use the strategies of each other neither of them will ever become a successful trader. The choice of an optimal strategy will also depend on the instruments you want to trade. Stocks, currencies, indices and cryptocurrencies are not traded in the same way. Long/short-term orientation will also matter.

You and only you are responsible for finding the strategy that works. That’s also a part of becoming a great trader.

When the strategy is finally carved out it is time to turn to risk management, arguably the second most important factor in any deal. A brilliant strategy is clearly necessary but at the same time not enough to turn a fellow trader into a great one. Without a proper risk management strategy, you may win a trade or two but in the end of the day will find yourself losing money. Risk management, therefore, is a must for ever successful trader. Add to that a good measure of self-discipline to keep yourself from making impulsive decision.

Last but not least is flexibility. As there is no single universal trend or pattern the global markets demonstrate, you would want to be as adaptive and flexible as possible. Being bullish one minute doesn’t mean you wouldn’t want to turn bearish the other. Being able to change your mind, instead of sticking to an outdated strategy, is another quality a great trader can boas