7 Habits of highly successful equity market traders - Motilal Oswal
7 Habits of highly successful equity market traders - Motilal Oswal

7 Habits of highly successful equity market traders..

A trader is, essentially, an equity market participant who takes a shorter term view on the markets. This could stretch from a few hours to a few days. Traders normally prefer to ride the momentum in the market and don’t bother about valuations. They focus on which way the market wind is blowing; which is what actually drives traders. From the days of Jesse Livermore, market participants have tried to grapple with the question of, "How to be a successful stock trader? Obviously, it is not just about online stock trading tips and tricks. It is something more; in fact a lot of good old virtues like patience, discipline, persistence etc. Unlike what a lot of people tend to believe, successfully trading is not about adding risk and shooting from the hip. It is a lot more about how you manage your risk. Here are the 7 habits of a highly successful equity trader. While these are written with reference to equities, they can apply to other asset classes too..

 

1.  Be optimistic but also be realistic

How to become a successful stock trader in India begins with blending your optimism with realism. As a trader you always need to believe that there is another day for you to trade profitably. You cannot afford to lose hope and that is one of the 7 habits of highly successful traders. From Jesse Livermore to George Soros; they have all been undying optimists. At the same time it is necessary to be realistic about your expectations. As a smart trader avoid falling in love with one stock or one strategy. Also be realistic about the returns you can expect from trading. Remember, trading is a way of earning through discipline not by taking on unbridled risks.

 

2.  Persistence can be your friend

Great traders are very persistent, almost to the tune of being indefatigable. There are no stock trading tips and tricks here; it is all about how you train your mind to continue to work towards your goal. In trading, you win some and you lose some but that cannot deter you. When you have created a trading philosophy you need to persist with it. That is how to become a successful equity trader in India and virtually in any market.

 

3.  Learn from the market rather than trying to outguess the market

A lot of us tend to believe that the typical trader is a brash artist who takes big bets against the market. These are few and far between. Generally, trading is all about constantly learning from the market, having the humility to constantly tweak your strategies and try to be as close to the market trend as possible. If you want to know the 7 habits of highly successful traders in equities, then this point will rank at the top.

 

4.  Manage your risk every minute of the day

Sounds ironic, right? But trading is all about managing your risk. Whether you are Jesse Livermore or Stanley Druckenmiller you are always trading with finite capital. Secondly, you are leveraged on your positions. Therefore, the key focus should be to manage your risk. Be clear on how much capital you are willing to lose on each trade and position yourself accordingly. One of the most important stock trading tips and tricks that you need to follow is to always know your worst case scenario.

 

5.  Costs matter a lot when you are trader

If you want to learn a key step on how to become a successful stock trader in India then learn to become cost-conscious. As a trader you churn your money as often as possible in search of opportunities. That means you need to operate at the lowest cost possible. For a trader, even a small increase in costs adds up to quite a bit. You should not only worry about brokerage and statutory costs but also the opportunity cost of money. If your capital is earning less than a bank deposit after all the trading effort, then it is surely not worth the while.

 

6.  Focus on how well you execute your trades

If you were to look at a very meaningful habit among the 7 habits of highly successful traders then you need to focus closely on how to execute your traders. This has many dimensions. Do you place market orders or limit orders? Are you using charts effectively to identify good levels to enter and exit? Do you buy your position in bulk or do you phase it out gradually? Normally when you phase your purchase or sale you can get better levels. Are you overbuying or overselling in the midst of momentum? As a trader, these small issues pertaining to execution matter a lot!

 

7.  Be an avid reader, researcher and a learner..

A lot of people may find this point slightly incongruent. You always thought that research and reading was for investors and not for traders. That is incorrect! To be successful as a trader in India you need to understand the companies you are trading in. Your approach to the company may differ but the trader also needs to research. A trader needs to be absolutely well informed about the latest macro and micro events. That is the only way to take an informed trading decision. Above all, a trader needs to go through a constant process of learning and unlearning. You cannot be an outdated trader in the equity markets.

 

If you are wondering how to become a successful stock trader in India, remember that it is not about any esoteric stock trading tips and tricks. The 7 rules of highly successful equity traders is all about the plain and boring virtues like discipline, hard work, persistence and a lot of humility!
 

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