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These 5 Tips Are Critical for Successful Traders

Learn the most important psychological strengths you must cultivate to successfully trade the markets.

by Bob Stokes
Updated: August 17, 2016

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[Editor's Note: The text version of the story is below.]

If you want to increase your success rate in financial markets, join the Marines.

Or, at the least, act like a Marine.

Let me explain: In 1984, Elliott Wave International President Robert Prechter won the United States Trading Championship, setting a new all-time high profit record of 444.4% in a monitored real money options account in four months.  The second highest reported gain in the options division was 84%, and 83% of the contestants lost money.

How did Prechter achieve such an impressive victory? (Spoiler alert: Prechter was never in the Marines.)

Well, that's just what subscribers wanted to know. So they asked him for "tips" on trading, and even wanted the details of the approximately 200 short-term trades he made during the competition.

In response, Prechter wrote an essay "What a Trader Really Needs To Be Successful" in November 1986. Here's an excerpt:

“Among a handful of consistently successful traders of my acquaintance, three of them are former Marines. In fact, the only advisor consistently to beat my Telephone Hotline record from 1983 to 1985 was a former Marine as well. Now, this is a ratio way out of proportion to former Marines as a percentage of the general population! Why should this anomaly exist?  At some point in their lives, these people volunteered to serve in an organization which requires, above all, discipline. … These people knew they were ’tough,’ and wanted the chance to prove it. Being ‘tough’ in this context means having the ability to suppress a host of emotions … .”

Traders know that trading is an emotional exercise, not just an intellectual one. (That's why, says Prechter, paper-trading is never adequate training for the real world.)

And what are some of the major emotions that these Marines and all other traders have to battle?

An Aug. 5 article titled "8 Ways Your Emotions Are Killing Your Investments" from GoBankingRates.com provided a list:

  • Envy
  • Fear
  • Hope
  • Stubbornness
  • Pride
  • Anger
  • Shame
  • Depression

The CEO of a wealth-management firm is quoted as saying:

"My 32 years of advising folks suggests that the No. 1 mistake investors make is when they panic. … It is fear, which causes people to act on an impulse and sell. Impulse is not an investment policy."

The former Marines Prechter was referencing possessed the discipline to stick to a trading method despite the emotions that attend trading, and this includes the fear of giving back a small profit.

They had the mental fortitude to let the rare, big trade play out for huge gains. They also had the will to bite the bullet and get out of a losing position -- instead of waiting for it to “turn back around.”

Bob Prechter

What You REALLY Need to be a Successful Trader

In this special report, Bob Prechter reveals the most important psychological strengths you must cultivate to successfully trade the markets. He gleans from experience as he explains five things you need to have to become a truly successful trader.

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