9 Habits of Highly Profitable Traders

day trading habits

“We first make our habits, and then our habits make us.”

— John Dryden


Human beings are little more than the sum of that which they do regularly… systematically… without even thinking about it.  In other words, their habits.  These are the actions frequently taken with barely a thought as to origin, necessity or consequence…. automatic actions if you will.  If you want to understand your level of success and, more importantly, improve it in a given area, identify and isolate the habits of those who are most successful in that area and emulate.  Simple.

Pilots, surgeons, race car drivers, athletes etc. all have specific steps they follow to achieve desired results.  Their oft repeated processes allow them to settle in and “just play.”  Excellence then, comes not from frequently changing your approach to performance, but rather from repeating what you have already discovered works.  Over and over again.

Trading is no different.  One of the first and most important tasks of new traders is to begin developing proper trading habits as early as possible.

If you want to increase your trading success (also known as profitability) find a successful trader who trades your market and uses your preferred approach, learn their step by step process and copy.  Rinse and repeat.

Here are 9 trading habits of successful traders to get you started.

  • Respect risk — trade risk is the amount you’re willing to lose on a trade.  And by the way, your trade risk is not the entire value of your position… unless you’re a complete moron.  Your trade risk is actually the difference between your purchase price (if you’re a buyer) and the price at which you’ll admit you’re wrong and exit said position.  For example, Roscoe buys 1 share of stock A for $100.  He decides a decline to $90 will mean he’s wrong and that he should take his remaining dollars and go home.  Roscoe’s trade risk is $10 not $100.  And before you go being a wiseass, yes stock A could indeed collapse through $90 straight to $0 before Roscoe has a chance to make his exit… but that’s highly unlikely.  At any rate, the best traders spend an inordinate amount of time making sure they get trade risk right… you should too.
  • Do the work — no doubt about it… trading can be immensely lucrative.  Immensely.  Yet for some reason, many people think they can come to it with barely any training and/or time invested and succeed alongside the best of us (or if they’re really unfortunate, against the best of us).  Don’t be one of them.
  • Work a LOT more — the best traders do all of their charting, thinking and most of their decision-making when the markets are closed.  Losers try to make good decisions when the market is moving and idiots try to think and make good decisions when the market is moving fast.  Don’t be one of them.
  • Develop a process — even if you’re just looking to trade your investment portfolio more effectively, determine your approach, establish a process, then follow that process religiously each day, week, month, quarter or whatever your adjustment period.  this is where all these trading habits become even more useful.
  • Keep it simple — the more complex a strategy, generally the more variables it has.  The more variables a strategy has, the more things that can (and will) go wrong.  Don’t believe me?  In 1998 perhaps the greatest gathering of IQ in a single hedge fund went belly up… and nearly took the rest of the world with them.  All because they used those IQs to “outsmart” the markets with fancy, complicated analyses.  The name of the fund?  Long Term Capital Management.
  • Become a “Waiter” — losers “chase trades.” Regularly.  They do this to “be in the market,”  or because they’re afraid to “miss the move.”  Profitable traders wait for their back-tested (and forward tested), high probability, high expectancy trade setups to appear… no matter how long it takes.  Kinda like this guy.
  • Be consistent — once you find a process that works, “ride it until the wheels fall off.”  Monitor your process diligently, but don’t be a tinkerer.
  • Concentrate — That’s not a suggestion to focus intently.  Focus is important, but here we mean avoid being diversified.  Balanced, diversified portfolios are for large mutual funds which must have 80, 90 or 95% of their billions in assets under management (aum) invested at all times.  They attempt to mitigate risk by owning multiple sectors which, according to traditional finance theory, should prevent outsize negative impact from any single stock or sector.  In reality, while diversification does limit downside, it also waters down investor returns.  And it does all this while magically maintaining the money made by assets managers (most charge a percentage fee based on the amount of money under management).
  • Keep your own counsel — traders like to talk about the markets, tactics, hardware, service providers, etc.  Losers want to talk about their wins… and never their losses.  Don’t be a loser.

Use this list to get you started developing your own winning trading habits. 

If as Aristotle pronounced “we are what repeatedly do,” then you will be well on your way to becoming the profitable trader you want to be.


The Trader