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1. Wealthy Traders
Are Patient with Winning
Trades and Enormously
Impatient with Losing Trades
This first habit is straight
out of Dennis Gartman’s
(TheGartmanLetter.com) trading
playbook. Most traders become
very anxious with winning trades
because they do not want them
to become losing trades. That
is a good thing – until their
impatience forces them to exit
their winning position too early
and leave money in the market.
On the other hand, how many
times have you said to yourself,
“I am going to let this losing
trade go just a little bit longer
and see if it turns around.” You
have just been patient with a
losing trade and impatient with
your winner.
Wealthy traders flip this thought
process around and do exactly
What Does It Really Take to Succeed? the opposite. When they have
a trade that is going well and is

20 Habits of Wealthy Traders – Part 1 profitable, they remain patient to

see how far it can really go. When
they have a trade going against
them, they immediately exit to
In the course of interviewing hundreds of wealthy traders over the past years, we at www.TraderInterviews.com have noticed a pattern. Listening to limit the loss and begin looking
them talk about how they make their living in the markets, we began hearing them say similar things about how they approach every trade. When for the next opportunity. If you
traders who all make over $200,000 per year say the same things, being traders ourselves, we listen. Through those hundreds of interviews, some have set a stop loss, never move
over the phone and some in-person, we compiled a list of 20 habits that are common among almost every wealthy trader with whom we have it in the hope that your trade will
talked. Some will be familiar to you, others may be surprising. Either way, we hope you will find at least one or two habits you can add to your own turn around – it rarely will and
trading plan to make more money, more consistently, as a trader. will only increase your loss for
the day. Start being patient with
your winners and impatient with
 TRADERS´ Coverstory
7
your losers – it is the first step 3. Wealthy Traders View
toward joining the minority ranks Technical Analysis as a
of wealthy traders. Picture of Where Traders
Are Lining up to Buy and Sell
2. Wealthy Traders Realise Many traders view moving
that Making Money Is More averages, Fibonacci and trendlines
Important than Being Right as exact places where price is
It is human nature to want to expected to turn and move in the
be correct in our assumptions opposite direction. Successful
and predictions on the market. traders do not view technical
We all want to believe we are analysis that way. Wealthy traders
interpreting market data properly see charts as snapshots of where
and have made the right choice traders are lining up to buy or
to go long or short the market. sell. Instead of seeing bars, lines
But wealthy traders rarely have and clouds, wealthy traders see
a bias on the market prior to price points where traders have
the open or any time prior to placed orders to enter and exit the
entering a trade. Once they do market, either as stop losses or
make a trading decision, if the entry points. The stock, option or
trade becomes a loss, indicating futures contract has no idea where
they were initially wrong, they it will find support or resistance.
Tim Bourquin will have no problem immediately It is the market participants who
making a trade in the other determine this and experienced
Tim Bourquin is direction. traders know this and will place F1) Focus on the Loser Trades
the co-founder of I have interviewed successful their own orders around those
TraderInterviews.com and traders who form a bias in the levels to take advantage of the
both the Traders Expo and the morning and will only trade in the 95 per cent of traders who lose
Forex Trading Expo. While a direction of that bias for the day, money trading.
police officer with LAPD, Tim but they are rare.
was trading the stock and Instead of trying to force 4. Before They Enter
currency markets by morning their opinion on the markets, Every Trade They Know
and arresting criminals determined to prove themselves Where They Will Exit for
by night. Each month Tim correct, wealthy traders will either a Profit or Loss
interviews successful full-time switch sides at a moment’s notice We have all heard that we should
traders and asks them tough if the market tells them it is time be using stops whenever trading to
questions about the strategies to do so – even if they were avoid large losses. However, very
they employ, the software they “sure” the market was going to few traders actually know where Wealthy traders are patient with winning trades and enormously
impatient with losing trades. While a breakout trader had to cut losses
use, and how they became go the other way that day. Being they will place a stop and a profit in Microsoft (MSFT) in December, he would certainly let run his profit
in January for a while.
confident in the markets. right is not important – growing target before they enter every trade.
their trading account and net Wealthy traders leave nothing to Source: www.tradesignalonline.com
worth is. chance and plan every trade in its

03/2012 www.tradersonline-mag.com
 TRADERS´ Coverstory
8
entirety before they even enter. in the “edge” we think we have in Your trading plan should
Your written trading plan the markets. Our setup appears include some sort of
should have objective measures again and instead of taking consequence for a string of
of where your stop loss should that fifth trade, we hesitate, not losing trades. For Tim Bourquin F2) Analysing Charts
be placed as well as where you wanting to endure another losing personally, after four losing
will take profits. Not knowing, or trade. Of course, that fifth trade trades in a row, he forced himself
simply guessing at where these would happen to work beautifully to trade a single share of stock
price points will be after you and not only would have made up until he felt confident in his
have entered a trade can lead to for the previous four losses but trading decisions again. Yes,
indecision or price targets outside put us net-positive for the day. commissions wiped out any
of the average range of the Unless the market has indicated profit on a single share of stock,
security you are trading. Why set something has changed and we but he would much rather pay
an arbitrary profit target of three truly believe our strategy is solid, a commission than take a large
points when the average range of there is no reason to hesitate if loss trying to force his will on the
that market is only two points? the trade setup presents itself. market.
Furthermore, wealthy traders set Even automated system traders
position sizes and stop losses that will tell you that a run of losing 6. Wealthy Traders Wealthy traders view technical analysis as a picture of where traders
are lining up to buy and sell. Analysing the S&P visually provides
are almost always a function of their trades that goes beyond the Use “Naked” Charts insights to where potential buying (see green areas) and selling
pressure (red areas) will occur with high probability.
risk tolerance for any given trade. normal drawdown in back tests When we first begin trading,
For example, if the maximum risk is normal. The key, of course, is we want to see confirmation Source: www.tradesignalonline.com
on any one trade is two per cent of knowing when your “edge” is no from as many indicators as
their trading account, the number of longer an “edge” vs. a statistical possible before we would enter
shares they will trade (based on the run of trades that just have not a trade. We put so many lines,
price of shares) and a reasonable worked out. arcs and levels on our charts F3) Knowing What to Do in Advance
stop loss is calculated before the Wealthy traders are able to we could barely see the price
trade is placed. We rarely talk with shrug off losing trades and enter bars beneath. As we mature as
a wealthy trader who says their the next trade with the same traders, we begin peeling off
position size is 1000 shares. They enthusiasm and confidence they those indicators and eventually
usually tell us it depends entirely had on the first trade. Teammates came back to charts that had
on what they are trading. They take of Evan Longoria, an All-Star price bars, volume and pivot
their maximum acceptable loss and baseball player for the Tampa points that represented previous
work backward to find a stop loss Bay Rays, often describe his highs and lows. Nearly every
and position size that matches that batting success as his ability to wealthy trader we interview tells
objective measure. forget about the previous bad us that they watch one thing on
swing or missed pitch and focus their charts: price. By “naked”
5. They Approach solely on the next pitch coming charts we mean those that are
Trade Number Five with toward him. Wealthy traders have barren of indicators and show Before they enter every trade professionals know where they will exit
for either a profit or loss. Trading the breakout at Amazon (AMZN)
the Same Conviction as mastered the ability to forget just price and perhaps volume at shown above, the stop could be at 173 and targets at 195 and 215
(each slightly below the corresponding resistance levels).
the Previous Four Losing Trades about the previous trade and each price level.
We have all had that run of bad focus exclusively on the next At some point in everyone’s Source: www.tradesignalonline.com
trades that shakes our confidence opportunity. trading career, they realise there

03/2012 www.tradersonline-mag.com
 TRADERS´ Coverstory
9
is no magic indicator, no matter and imperfect data. It is indicator and technical analysis
how hard they look for it. The only likely you will never be totally tool they can find to spot those
thing that matters is price – and comfortable with your decisions areas where price is going to
supply and demand at that price. because you will never have reverse course and head the
If you have an indicator you feel enough information to know other direction. Wealthy traders
gives you greater insight into absolutely you will be on the do not try to anticipate the top
future price movement, excellent. right side of the market. or bottom. They wait for it to
Just know that too much faith Wealthy traders have come happen and then capture the
in any one, or combination of to terms with this fact and “meat” or middle of the move
indicators, is sure to after it has started.
fail at some point. The question they
Wealthy traders
firmly believe in the The middle of the ask is, “Has the
new direction been
phrase, “Price pays”
and are able to trade trend is where the confirmed?” as
opposed to most
with nothing but
information on price money is made. traders that ask, “Is
the trend ready to
and the demand in turn?”
the market at that Wealthy traders
price. have been able to make good realise that the middle of the
trading decisions in spite of trend is where the money is
7. Wealthy Traders Are that uncomfortable feeling in made, not on capturing every
Comfortable Making Decisions the chair. They acknowledge it last tick time perfectly at the
with Incomplete Information and yet they are able to make top or bottom. That is why F4) Naked Charts
Many traders we speak with at clear decisions based on what most traders are afraid to buy
events like the Traders Expo they know and see. The day all-time highs and sell all-time
talk about getting to the point trading is “easy” never comes, lows. Yet wealthy traders know
where trading is easier and yet they are still able to acquire that is the best place to buy or
comfortable. They yearn for incredible wealth trading the sell. A trend is much more likely
the day they are relaxed while markets. to continue than it is to reverse,
trading and make money on a so why are most traders trying
consistent basis. Unfortunately, 8. Wealthy Traders to find that turning point
we have to inform them that Stopped Trying to Pick instead of buying or selling the
even the best traders are slightly Tops and Bottoms Long ago existing direction? Of course
uncomfortable sitting in that Most of the traders we talk to this does not mean you do not
chair in front of their trading that are still struggling to find protect yourself if it does turn,
platform. The difference is that their “edge” in the markets but trying to capture that final Wealthy traders use “naked” charts. As can be seen with the example
of JDS Uniphase (JDSU), important information such as the absolute
they have become comfortable are trying to pick tops and upward tick before it heads level of a stock as well as its volume, volatility and support/resistance
can immediately be recognised without using any further instruments.
with that gnawing feeling we bottoms. Whether it be on a lower is a fool’s game. Wealthy
all get that we are making 1-minute chart or a daily chart, traders do not so neither Source: www.tradesignalonline.com
decisions based on incomplete most traders are using every should you.

03/2012 www.tradersonline-mag.com
 TRADERS´ Coverstory
10
9. Wealthy Traders Do political climate for the long-term are “reading” the market with
Not Think of the Market investors and talking heads on more confidence.
as “Expensive” or “Cheap” TV. If we believe someone will be Almost every wealthy trader we
Watch any business television willing to buy oil futures at $505 in have interviewed has told us that
channel for a while and you will two hours, we will buy $500 oil all just one or two trades a month,
hear commentators refer to a day long. make their month. Some have
stock or the oil market as looking There is no “cheap” or said that one or two trades a
“expensive” or “cheap at these “expensive” in the eyes of a year, make their year. Imagine the
price levels.” The vast majority wealthy trader. patience it must take to wait for
of market participants will look those special trades every month
at a stock and judge it to be 10. Wealthy Traders or year. Wealthy traders possess
“expensive” simply because it Are Aggressive with Size that patience.
has had a long run to the upside. When They Doing Well and They are quick to recognise
25 cent call options that are far Modest When They Are Not those “make my month” trades
out-of-the-money a week before Dennis Gartman is famous for and will quickly scale in with extra
expiration are “cheap” because telling traders, “Do more of what size once their initial positions
the maximum you can lose is a is working and less of what is show profits. They trade normal
quarter, right? Wealthy traders do not.” It seems simplistic but you position size and make some
not view price that way. would be surprised how many then lose some. But when the
The only thing that matters to traders try to make up for losses one or two trades come along
traders is this: Is someone going by simply doubling their share they feel very strongly about, they
to pay more or less for this stock size with the same strategy. scale in big and with enormous
five minutes from now, an hour They also fail to capitalise on confidence. They take “letting their
from now, or a day from now, those trades that become gains winners run” to the extreme and F5) Do not Think in Terms of Expensive or Cheap
depending on their time frame. immediately and anxiously sell are able to see that “great trade”
Google at $650 is not expensive their positions just at the time materialise before their eyes.
if someone is willing to pay $651 when the wealthy trader would This does not mean they
for it in 30 minutes. Likewise, be doubling their position. Once throw their risk parameters out
penny stocks are great because again, the inexperienced trader the window. On the contrary,
you can buy a lot of shares in a does the exact opposite of what a their risk tolerance remains as
small account, but is $2.00 really wealthy trader would do. disciplined as ever. But they
a good buy if tomorrow they are Wealthy traders are masters of realise that not taking advantage
only worth $1.50? piling on huge size when they are of the opportunity at hand can
Successful short-term traders trading well and feel like they are also cost them money. Knowing
who make their living buying and interpreting market data properly. when those trades come along
selling only care about being able They are also experts at reducing is a matter of experience and
to profit on something during position size dramatically confidence in their trading Great traders do not think of the market as “expensive” or “cheap”.
While a fundamental analyst would have considered Apple (AAPL) as
their holding period. Leave the when they are not. Instead of system. sell a long time ago, all a great trader would see is that this stock is
making new all time-highs and the stock therefore – as of that point in
arguments about whether $150 attempting to make up for losses Stay tuned for Part 2 where we time – keeps up being a buy.
oil is ridiculously overvalued by adding size, they quickly scale will reveal habits 11-20 of wealthy Source: www.tradesignalonline.com
in the context of the current back to tiny positions until they traders.

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