Top 7 habits of highly effective traders

Have you ever wondered how to become a highly effective trader? What kinds of qualities make a high-performance trader? Or how to develop winning and successful trading strategies?

Let us have a look at 7 habits of highly effective traders that will help you be a better trader by increasing the profitability of your trading strategy, helping you focus on the best markets for your trading, and encouraging you to adopt the right mindset.

1. Create and follow your trading plan.


The most important habit of highly effective traders is having - and sticking to - a trading plan.

A trading plan is like a roadmap that guides all your trading actions, from analyzing the markets to opening/closing your trades and managing your positions. Everything should be laid out in your trading plan, so then there is no room for improvisation or emotions.

Your trading plan should be written to take into account your personality, your risk aversion, and your overall strategy, as well as your trading goals.

2. Develop money management skills.


Your trading plan should always include money and risk management rules to protect your trading capital.

So, you need to learn how to develop money management skills from the start, taking into account the size of your portfolio, your trading goals, as well as your risk appetite.

Think about defining a level of risk per trade, choosing the right leverage, using a risk/reward ratio of at least 1:3, and setting up stop-loss and take-profit orders, for instance.

3. Adopt a trading routine.


One of the best habits of highly effective traders is to create a trading routine they can rely on to be more efficient and improve their trading process to beat the markets.

You need to determine what makes a perfect trading routine for you to profit from structured and efficient trading.

Then, you have to consistently follow it, so then it quickly becomes a habit that will help you reduce stress and focus your time and energy on what it takes to succeed as a trader.

4. Know the full capabilities of your trading platform.


A trading platform is a key element to your trading success, as it is the software you will not only use to open, close, and manage your trading positions, but also analyze the markets according to your strategy.

Some trading platforms offer different features and options you should be aware of to make the most of it.

By getting a deep understanding of the trading platform you’re using, you might discover unique functionalities that can help you improve your trading strategy, reduce your overall risk or give you a chance to implement an entirely new approach to the markets.

5. Record your trades in a trading journal.


Keeping a trading journal is a great way to develop your skills and spot your strengths/weaknesses, as well as improve your strategy.

A trading journal will indeed allow you to analyze your trading process and results by recording various data within it.

The date, time, and direction of your trade, trading instrument, timeframe, position size and leverage, entry/exit level, money management rules used, and trade outcome are the most relevant pieces of information to capture.

However, there is other, less basic information you should add to your trading journal to better understand your process and how your emotions influence it, like explaining the reasons why you did what you did.

6. Make necessary adjustments to your trading system.


Another under-estimated habit of highly effective traders is to review your trading system from time to time.

Your trading journal is a good way to start determining what needs to be improved in your trading, but you should also remember that a trading strategy often only works in a single market condition.

If you want to be able to make the most of all trading conditions, then you might want to make adjustments to your trading system to be able to take advantage of trendy markets, rangy markets, breakouts, etc.

7. Know when to trade and when not to.


The last item of our top 7 habits of highly effective traders seems simpler than the other ones, but it is often underestimated by traders.

To avoid making costly mistakes, you should always know when to trade and when to avoid trading according to your mood and general state, as well as according to the current market conditions and your risk tolerance.

If you’re not 100% feeling well, for instance, you will easily be distracted and might miss opportunities or worse, deviate from your trading plan. If you’re on a winning/losing streak, the chance that your emotions take over is higher. In these situations, you should stop trading for a little while.

Now that you’re aware of some of the best habits of highly effective traders that will take your trading to the next level, it’s time you show the world what you got by participating in the Trading Cup trading contest!

Trading Cup // Education