The Key Traits of Successful Traders

One of the key traits of successful traders is the ability to make quick decisions and move fast when opportunities develop and still staying patient and doing very little while waiting for the trade to work. Most people have difficulty with this duality. They either tend to act impulsively and stay in constant motion or be so patient that inertia sets in.

To be a better trader you need to cultivate this behavioral pattern. It does not come naturally to most people so it is necessary to have a high level of self-awareness if you want to develop the ability to be both aggressively decisive and patient.

There are five key traits that aggressive, patient traders should develop:

1. Don't wait for the perfect setup. I recently saw a quote from General George Patton cited on Twitter (TWTR) : "A good plan violently executed now is better than a perfect plan executed next week". When you wait for the perfect setup you tend to never find it. It is generally better to enter a sup-optimal situation and then trade it aggressively than wait for perfect to occur. The cost of being on the sidelines is typically much higher than the cost of a bad entry. As Wayne Gretzky is famous for saying "You miss 100% of the shots you don't take."

Once a trade is in play there are many ways to manage it. Sometimes things will not go the way you hoped but they do go right a surprisingly high percentage of the time, in the right market environment, and the overall benefit is substantial.

1. Be aggressive. In my trading career the issue I have struggled with more than anything is being consistently aggressive. If you are consistently profitable over a long period of time the logical thing to do is to increase the size of what you are doing. Unfortunately when you trade bigger, you introduce more risk and that impacts your emotional state. The decisions you make when you hold a small position tend to be different than those that you make when you have a bigger position and that is the challenge.

There are several ways of dealing with this. The first is a high level of self-awareness. Ask yourself if your emotions are impacted by your more aggressive positions and are impacting your decisions. It may still be difficult to deal with the way you feel but you can address it more objectively if you don't' suppress your feelings.

A second way to deal with this issue is to be consistently aggressive. Most traders grow comfortable with certain trade sizes and don't challenge themselves to go bigger. To do that effectively you have to develop a consistent pattern of action and you won't do that if you just are aggressive on a limited basis. Your trading shouldn't be significantly different if you increased your trade size by 10-fold but it will likely vary wildly if you don't do it consistently. You have to develop new habits and be able to control emotional responses.

1. Giving a trade enough time to work. One of the hardest things for aggressive traders to do is to give a trade time to work. When a stock does not go straight up traders tend to whine and moan about it rather than consider it a strategic opportunity. The fact that a trade doesn't work immediately may actually be a good sign in many cases.

Some of my best trades tend to occur when I forget about a stock for a while. I have found that having a lot of positions can be good as it distracts me from focusing too much on any one trade. Being able to ignore a stock is a very valuable ability but extremely hard when you have an outsized position

My favorite way of cultivating patience is to make partial buys and sells. The partial buy or sell will satisfy my desire for action but allow me to stay in a stock that I think will work over a much longer period of time. The biggest problem with this approach is that it is easy to make partial sales too quickly but that can be remedied to some degree by starting with bigger size.

1. Cut losing trades without mercy. When you have a losing trade don't hesitate to cut it. Take the loss and remove the emotion. The important thing is that there be a plan and that you stick with it. You should have a clear idea of a stop level when you enter a trade and when it hits you do what you planned to do. Don't' come up with a justification to do something different. Make the sale and then look at it again if you so desire.

1. Be ready to change your mind. Several times this past week I sold a stock into strength and then bought it again the same day at a higher price. The sales were consistent with my 'partial sale' methodology but as the action progressed it seemed to me that the chances of sustained momentum were high and it made sense to participate. The fact that I had just sold some shares earlier was not relevant to the decision. The situation had shifted and I need to make a new decision. I really didn't change my mind but it can feel that way if you let your past action influence what you do next.

Everyone should have a trading plan for every stock they trade but that plan should allow for flexibility. I don't necessary know in advance when I will add to a position or how many shares but I have a plan to do something when the right conditions develop.

Aggressiveness combined with patience is an extremely powerful force. If you can develop both attributes you are sure to be a more successful trader.

At the time of publication Rev Shark had no position in the securities discussed.