Day trader character traits & how they affect strategy

Day trading discipline

Day trading is referred to as a discipline in the article opening, which is apt. Day trading itself is a discipline and successful day traders need a firmly entrenched discipline to achieve success.

Overt discipline is demonstrated in following routine, maintaining mental and physical condition, and meeting commitments while – typically – working from a home office. That overt level of discipline is expected, the price of entry. Day trader discipline is more critically found in the formation of a trading plan and adherence to it. Not to say trading plans should be static but that iteration should be a considered decision rather than deviation in the heat of perceived opportunity.

Trader discipline enables the successful to focus while waiting for opportunity and avoiding distraction. And when the disciplined trader perceives their trading plan indicators, moving swiftly and assuredly into action. Trade plan adherence is a practiced discipline.

Patient decisiveness

Patient decisiveness may sound oxymoronic to those starting out in day trading, while experienced day traders with a record of advancing their trading plan recognise the ‘hurry up and wait’ nature.

Good day traders adhere to their trading plan strategy and avoid entering or exiting positions at the wrong moment – that is patience. They are vigilant and alert to key market indicators and when the right moment arrives react quickly without second guessing themselves – decisively. Trade plan execution demands patient decisiveness.

Comfort in ambiguity

Flexibility, adaptability, open mindedness – all reflect a trader’s ability to thrive in unpredictable and rapidly changing circumstances. This includes making strong trade decisions under pressure – even with a backdrop of capital drawdown. This is a high bar to reach.

Virtually every part of a day trader’s life is uncertain. Markets themselves constantly change and while some trends repeat, no real trading day is alike. Market strategies are therefore subject to nuance with even proven strategies requiring adjustment to be effective on a given day – because no day’s range, trends, and volatility will look the same as in the strategy document. Outside economic, social, and political forces are unpredictable and have a significant immediate impact on market conditions. The contemporary 24-hour trading cycle means that even day trader working hours are unpredictable, with unexpected occurrences causing you to slide back to your desk asap.

Successful day traders become accustomed to the ambiguity and thrive in it. Another way of looking at it is that people inherently prefer certainty and strive to achieve it. Successful day traders have cultivated the ability to look openly at the volatility and identify trading plan signals through the noise, thereby bringing order to the chaos.

Mental fortitude

If descriptions of discipline, patience, decisiveness, adaptability, and comfort with ambiguity haven’t turned you off day trading, you likely have some degree of mental fortitude. That’s good, as it’s a core trait of successful day traders.

The uninitiated consider a successful trade one that makes a killing, quadrupling the investment or better. Experienced day traders know better – losses are virtually inevitable so winning a margin more than you lose, gross, indicates success to most. Successful traders experience losing trades regularly but they display the mental fortitude, the trait of toughness, to keep pursuing their strategy. Discouraged traders risk lost opportunity, seeing a trade that meets their strategy but prevaricating and undermining their own success.

Mental fortitude gives successful day traders the resilience they need to ride out the losses or losing streak. From that vantage they can dispassionately evaluate whether the strategy needs iteration of if the market itself simply isn’t providing strategically aligned opportunities. Each action and inaction requires armour-plated determination.

Independence

You may have noticed that each of these core traits builds on or adds to those preceding. Independence and mental fortitude are entwined, due to the amount of influential material that will pass a day trader’s eyes daily. The balance is capturing helpful insight and parsing it through your own filter and strategy to make an independent decision.

Most day traders start out taking advice for trade entries and exits from mentors, articles, and influential traders. Over time traders generally shift from trade move recommendations to consuming market insight and using that information to make independent decisions. Traders-in-waiting often practice these skills with a shadow portfolio, but at some point the training wheels come off.

Note that independence doesn’t mean ignoring advice – insight can come from the most obvious or most unusual source. Networking, education, and mentorship is recommended, with independence referring to the ways that you apply insight instead of leaning on other’s opinions.

Other traits

The primary traits above are shared by all successful day traders. Each also has characteristics that aren’t common to successful day traders – it is from these secondary traits that springs the independent strategy each pursues. Their flair as a day trader. Unlike the primary traits, none of these is good or bad – they’re simply different.

Openness

This refers to the day trader’s enjoyment of novelty. At one end of the scale is high creativity, a trait which equips the successful day trader to synthesise multiple disconnected insights and hypothesise possibilities better than others. Day traders at the other end of the scale are more conservative, hone their strategy, and adhere to it.

High openness: Ray Dalio, Sasha Evdakov

Low openness: Steve Cohen, Rayner Teo

Data or people orientation

This refers to the balance of reliance of data driven insight versus networking insight (and gossip). A tremendous insight can be garnered from innovative and imaginative data analysis – and one good conversation can spark a critical trading vision! It is rare that a day trader naturally has both traits.

Data driven: James Simmons, Ken Griffin

People oriented: George Soros, Brett N Steenbarger

Risk averseness

Day trading is an exercise in mitigated risk – but risk nonetheless. Successful day traders balance the imperatives. Those that are more risk averse employ a greater degree of caution and have built their wealth portfolio more slowly but assuredly over time. Less risk averse successful day traders will speak of a few trades that leapfrogged them ahead – and how one would have wiped them out if they hadn’t pulled it off. Both strategies achieve success, via substantially different trading profiles. It’s worth noting that academic studies have shown day traders with substantial delta in current V aspirational status carrier a riskier portfolio.

Less averse Bill Gross

More risk averse. Ross Cameron

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