Tend to be Tightwads, Not Heavy Spenders
Most successful traders I know are tightwads with their money. While this is not a criteria for being successful, I think this is a characteristic that helped lead to their success.
Ben Franklin once said "A penny saved is a penny earned" => I can't think of a career where this is more applicable than it is in trading.
Being a tightwad puts the trader in the right mental state to become successful in their trading. I'll suggest several examples:
- A struggling (but tightwad) trader has much lower living expenses than a struggling trader with a high lifestyle. Therefore, the tightwad may be able to survive 12 months of learning curve, while the high living trader will find another line of work when his savings evaporate after 6 months.
- A tightwad trader carefully reviews of all their trading expenses, focusing on every angle for where they can save some cash. Do I really need that $5-7k trading seminar, or will I be better off saving the cash and learning directly from the markets? Are the commission rates that I'm paying really fair, given my trading volume (and re-asking this question over and over as your volume changes)? Which routing option is best for my order executions, in light of the various routing fees and performance?
Not amount to save is too small for the tightwad trader, and it all adds up. Think about it, successful trading is all about making money. It's about selling for more than you paid for it. It's about making dollars, or nickels, or pennies from your trades.
Let's think about is some more... You want to buy a stock on it's breakout at 25.17, but the stock got away from you and it's now 25.26, do you still buy the stock? It's 'only' nine cents above your intended price. Well, the tightwad would likely admit that he wanted it at his price, and now that price is not available, and he's not going to 'pay up' for the stock at these 'expensive' levels. The successful tightwad might accurately realize that his average trade generates only a profit per share of a couple of cents, so giving up nine cents on an entry likely makes the trade very suspect at these prices, indeed.
Note: Certainly, once a trader becomes extremely successful, they can 'afford' to increase their standards of living. However, most tend not to spend excessively and live way beneath their means. This is also very important, and prudent, as most traders have only their own savings to support their retirement and health insurance for their lifetimes, so it's best to build a sizable lifetime nest egg, prior to spending excessively.
Along these lines, the tightwad trader realizes that the 'glory days' of trading (whatever that means) may end tomorrow. As a result, they want to ensure that their savings will last forever, in case their trading income drops to zero beginning next week.
For many, many reasons, I think having a tightwad mindset is an important characterist of many successful traders (as well as many unsuccessful traders that are headed towards success). |
