10 Habits of Wealthy Traders – Part 1 Habits 7-10

7. Wealthy Traders Are
Comfortable Making Decisions
with Incomplete Information

Many traders we speak with at
events like the Traders Expo
talk about getting to the point
where trading is easier and
comfortable. They yearn for
the day they are relaxed while
trading and make money on a
consistent basis. Unfortunately,
we have to inform them that
even the best traders are slightly
uncomfortable sitting in that
chair in front of their trading
platform. The difference is that
they have become comfortable
with that gnawing feeling we
all get that we are making
decisions based on incomplete
and imperfect data. It is
likely you will never be totally
comfortable with your decisions
because you will never have
enough information to know
absolutely you will be on the
right side of the market.
Wealthy traders have come
to terms with this fact and
have been able to make good
trading decisions in spite of
that uncomfortable feeling in
the chair. They acknowledge it
and yet they are able to make
clear decisions based on what
they know and see. The day
trading is “easy” never comes,
yet they are still able to acquire
incredible wealth trading the
markets.

8. Wealthy Traders
Stopped Trying to Pick
Tops and Bottoms Long ago
Most of the traders we talk to
that are still struggling to find
their “edge” in the markets
are trying to pick tops and
bottoms. Whether it be on a
1-minute chart or a daily chart,
most traders are using every
indicator and technical analysis
tool they can find to spot those
areas where price is going to
reverse course and head in the
other direction. Wealthy traders
do not try to anticipate the top
or bottom. They wait for it to
happen and then capture the
“meat” or middle of the move
after it has started.
The question they
ask is, “Has the
new direction been
confirmed?” as
opposed to most
traders that ask, “Is
the trend ready to
turn?”
Wealthy traders
realise that the middle of the
trend is where the money is
made, not on capturing every
last tick time perfectly at the
top or bottom. That is why
most traders are afraid to buy
all-time highs and sell all-time
lows. Yet wealthy traders know
that is the best place to buy or
sell. A trend is much more likely
to continue than it is to reverse,
so why are most traders trying
to find that turning point
instead of buying or selling the
existing direction? Of course
this does not mean you do not
protect yourself if it does turn,
but trying to capture that final
upward tick before it heads
lower is a fool’s game. Wealthy
traders do not, so neither
should you
9. Wealthy Traders Do
Not Think of the Market
as “Expensive” or “Cheap”

Watch any business television
channel for a while and you will
hear commentators refer to a
stock or the oil market as looking
“expensive” or “cheap at these
price levels.” The vast majority
of market participants will look
at a stock and judge it to be
“expensive” simply because it
has had a long run to the upside.
25 cent call options that are far
out-of-the-money a week before
expiration are “cheap” because
the maximum you can lose is a
quarter, right? Wealthy traders do
not view price that way.
The only thing that matters to
traders is this: Is someone going
to pay more or less for this stock
five minutes from now, an hour
from now, or a day from now,
depending on their time frame.
Google at $650 is not expensive
if someone is willing to pay $651
for it in 30 minutes. Likewise,
penny stocks are great because
you can buy a lot of shares in a
small account, but is $2.00 really
a good buy if tomorrow they are
only worth $1.50?
Successful short-term traders
who make their living buying and
selling only care about being able
to profit on something during
their holding period. Leave the
arguments about whether $150
oil is ridiculously overvalued
political climate for the long-term
investors and talking heads on
TV. If we believe someone will be
willing to buy oil futures at $505 in
two hours, we will buy $500 oil all
day long.
There is no “cheap” or
“expensive” in the eyes of a
wealthy trader.

10. Wealthy Traders
Are Aggressive with Size
When They Are Doing Well and
Modest When They Are Not

Dennis Gartman is famous for
telling traders, “Do more of what
is working and less of what is
not.” It seems simplistic but you
would be surprised how many
traders try to make up for losses
by simply doubling their share
size with the same strategy.
They also fail to capitalise on
those trades that become gains
immediately and anxiously sell
their positions just at the time
when the wealthy trader would
be doubling their position. Once
again, the inexperienced trader
does the exact opposite of what a
wealthy trader would do.
Wealthy traders are masters of
piling on huge size when they are
trading well and feel like they are
interpreting market data properly.
They are also experts at reducing
position size dramatically
when they are not. Instead of
attempting to make up for losses
by adding size, they quickly scale
back to tiny positions until they
are “reading” the market with
more confidence.
Almost every wealthy trader we
have interviewed has told us that
just one or two trades a month,
make their month. Some have
said that one or two trades a
year, make their year. Imagine the
patience it must take to wait for
those special trades every month
or year. Wealthy traders possess
that patience.
They are quick to recognise
those “make my month” trades
and will quickly scale in with extra
size once their initial positions
show profits. They trade normal
position size and make some
then lose some. But when the
one or two trades come along
they feel very strongly about, they
scale in big and with enormous
confidence. They take “letting their
winners run” to the extreme and
are able to see that “great trade”
materialise before their eyes.
This does not mean they
throw their risk parameters out
the window. On the contrary,
their risk tolerance remains as
disciplined as ever. But they
realise that not taking advantage
of the opportunity at hand can
also cost them money. Knowing
when those trades come along
is a matter of experience and
confidence in their trading
system.
Stay tuned for Part 2 where we
will reveal habits 11-20 of wealthy
traders.


Source :www.tradersonline-mag.com

Thanks.
Good work.
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