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6 Personal Trading Checkpoints

Discover how many successful traders mentally prepare for trading to help keep their emotions in check.

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You could give two people the same set of rules and tools for trading and a year later they will likely have very different results. One reason why may be their trading styles: how they control their temperament during trading; what they believe about markets; whether their personality is more prone to fear or greed; how they evolve as traders. Being aware of the psychology behind trading brings the things you do well into focus and highlights areas of caution. 

As you evaluate yourself, your motivations, and perspective, consider the following six checkpoints.

Find a Trading Style that Fits Your Personality and Lifestyle

Look for a style of trading that fits your personality rather than try to make your personality fit a particular trading style.

Find a trading style that works for you. Not just in terms of profit and loss, but in terms of how it fits with your temperament, long-term financial goals, and other life commitments. Some traders find success with a more active short-term approach to trading, while others find position trades more appealing. Be aware of what makes you tick and develop your strategy accordingly.

Don't Let Intuition Lead to Impulse

Trading can start with a certain intuition or idea, but needs to be tempered by discipline and objective trading criteria.

Trading is not about becoming a machine. Your intuition and experiences can serve you well. You may notice that a certain store is always busy and want to learn more about the company. You might like an ad on TV, read a glowing magazine article, or see a lot of people rave about a particular gadget. Don't let your impulse overwhelm your discipline. Many successful traders understand that an idea or feeling about a company is not a reason to place a trade, but it can be a reason to do some research.

Do you know your trading style? Work with a Schwab trading coach for a full year plus earn 500 commission-free trades. Learn more

Be Patient

Know what you are looking for and wait until you see it.

Successful traders know how to wait for their pitch and resist swinging at everything else. It has been said that trading is 90% waiting. This discipline means avoiding the temptation to overtrade or chase the market. There may be periods when things are quiet because nothing meets your criteria. That is not necessarily something to be avoided.

Recognize Weaknesses; Build on Strengths

Build on the things you like and are good at and your weaknesses may not seem as big as they were.

One of the core principles of improving performance to is to 'build on strengths'. Focusing on strengths can often yield better results than trying to fix what's broken or learning to do something frustrating. People tend to get better at the things they enjoy and do well. Successful traders are not masters of every aspect of trading, nor do they need to be. They work to identify their trading strengths and then leverage them. Weaknesses can't be ignored, but they can sometimes be contained or worked around. If you don't understand a certain market, rather than pour energy into learning it, you may simply choose not to trade it.

When you Lose, Don't Lose the Lesson

Apply what you learn to future trades and don't allow them to linger.

Seasoned traders learn from their mistakes and failures and see them as opportunities to grow and enhance their performance, not to punish themselves. Traders who go into a "woulda, coulda, shoulda" spiral over a mistake or missed opportunity will often try to redeem themselves and end up making additional mistakes.

Assume Responsibility for All Results

Successful traders don't make excuses. They are focused on avoiding big losses and making money… not on being right.

Successful traders are accountable for every one of their trades—win/lose/draw. When you truly "own" your trades, you then have control over them. If you find yourself taking credit for the good trades and blaming the bad ones on someone or something else, you will not capitalize on those valuable lessons. 

Conclusion

Trading presents challenges and opportunities. Keeping the proper mindset is as important as any choices you will make about markets, strategies, and indicators. With the right mindset, you can better navigate many markets. With the wrong mindset, you will keep finding the same kind of trouble everywhere you go. Be aware of what you do well, recognize your weaker areas, and take actions that are consistent with this knowledge.

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