Many factors will impact your trading success, but all of them are a function of your emotions and thinking to some degree. Even the way you view a chart or fundamentals are determined in part by your emotional and psychological makeup.
There are certain emotional traits that many successful traders have in common. Some are born with these traits while others will have to actively cultivate them. While it may not feel natural for you to think and act in a certain way, if you cultivate those emotions you can change your behavior and thinking over time.
Three key personality traits tend to lead to successful trading: optimism, persistence and an acceptance of reality.
The factor that will determine your success more than anything else is optimism. Not optimistic that the market will always go straight up or that all of your stock picks are brilliant, but optimism that there will always be another trading opportunity no matter what the market does.
Rather than wallow in misery, when the market is acting poorly and their account is suffering losses, the optimistic trader focuses on ways to deal with the challenges and immediately starts thinking about the next set of opportunities that will develop. The great beauty of the market is that bear markets are always followed by bull markets and there is a new opportunity every day.
The optimistic trader is always confident that they will be able to find ways to eventually profit. The worst bear markets tend to also have the biggest counter-trend moves and even if you don't focus on shorting there are great opportunities in downtrends.
Opportunities are not a function of the market, they are a function of mindset. When the DJIA is down 1000 points are you focused on how bad it is or are you thinking about how you will eventually take advantage of the situation?
Most great traders are sloggers. They work at it day in and day out. They are driven in part by their optimism that there is another great trade out there but many of them have developed a work ethic over the years. Through thick and thin, they are looking for new ideas, managing positions, and developing strategy. It isn't something that they do once in a while. It is something that they do consistently.
One of the biggest benefits of persistence is that it leads to the compounding of returns. Steadily building an account over a long period is how you build great wealth. You need not be a buy-and-hold investor to compound your gains, you simply need to keep pushing your account to new all-time highs. That is the foundation of compounding.
Great traders are always looking for ways to improve. No matter how long you have traded you continue to learn. I am sometimes surprised at how I continue to develop as a trader even though I have been doing this for a very long time.
Acceptance of Reality
One of the main reasons that traders fail is they have unrealistic expectations. Why can trading be so financially rewarding? Because it is difficult.
If trading was easy and anyone could do it then you wouldn't be able to make much money at it. It is because there are so many others that fail that we can benefit. It is a zero-sum game to some extent and that means for you to win someone else has to lose.
Once you recognize and embrace the fact that trading is extremely difficult then you will appreciate that you are going to have many losing trades along the way. There is no way to make substantial money in the stock market without having a whole lot of failure as well.
Bad trades are not shameful or a reflection of your ability. They are inherent in the process of trading. If you don't have losing trades then you are very unlikely to have many big winners because you will never take the necessary risk.
Once you understand that bad trades are just the nature of trading then they will start to lose their sting. So what if you made a bad trade? Maybe you learned something and will profit from it in the future.
Traders have to understand that luck is their constant companion and something you cannot control. Sometimes you have good luck and sometimes you have bad luck. It is inevitable and has nothing to do with your skill as a stock-picker. It is just part of the process and once you accept that reality you will have the mindset to optimistically persist.
There are other emotional traits that can serve you well, such as patience and the ability to shake off inertia, but a combination of optimism, persistence and acceptance of reality will put you on the road to great success.