The mechanics of trading & investing - EWT Investing

The 1000 Most Important Habits of Successful Traders

“Read on to learn the Special Super-Duper 1000 Secret Most Important Habits of Successful Traders.”

Headlines and articles like these pollute the Internet these days, with the vast majority of such articles written by unsuccessful analysts, traders and marketers, hoping to draw you in somehow.

This article is inspired by some nonsensical trading “advice” I just saw one of my competitors in the Elliott Wave scene put out, and in it, I’m going to take apart a number of commonly spouted advice, most of which I saw in the article that triggered me.

The reality is that most analysts and traders are losers in the market. It usually takes a long time to become a successful active trader in any market climate – and the harsh reality is that only around 10% of active traders achieve long-term success. (For passive investors, the success rate is usually higher, depending on what decade they started their investment activities).

In no particular order of importance, let me dissect/expound upon a few devices.


1. Don’t listen to losers.

One of the reasons why most people fail in the markets, is that they listen to the advice of other losers. I must admit here that looking back on my own career as an analyst and trader, in the beginning I myself wasn’t aware of how little I knew. In other words, even a hard-working enthusiastic analyst can mislead you (in addition to marketers and con men which infest the cosmos of financial advice and trading).

It’s NOT easy to be a consistent winner in the financial markets. Just ask the people who got destroyed in XIV recently, incurring 90-95% losses in just one day of trading, on a strategy that was successful and profitable for years.

The financial markets constantly change, and hence, someone might be adapted to a certain market condition which could persist for years, only to then have the market change – sometimes very subtly – throwing their previous results out the window.

In fact, the only way for you to measure whether or not someone was long-term successful in the financial markets is at the end of their life. That’s the harsh reality of how traders and investors are to be accurately judged.

Now, I certainly hope that I’m very far from death myself, and I do like to think I’m a good and constantly improving trader & analyst but a final assessment of my own work cannot be done right now. That said –┬áin our Knowledge Base, there’s an article about my Trading Record (opens in a new window) which is non-periodically updated. There’s also the Results section in which the results of our analyses are (non-periodically) posted.


2. Planning trades in advance can be dangerous.

An often touted saying is “plan your trades and trade your plan”. While this advice can help emotional and impulsive traders to not take some trades, the truth is that a rigid plan is also dangerous.

One of the best but not-well-known traders here in Sweden, is an extremely successful daytrader who is an expert at market making. He makes hundreds to thousands of large trades every day in blue chip stocks – and he doesn’t plan his trades. In fact, he’s said in interviews that he executes trades first, and thinks later. He has very few losing days. So – why should he start planning his trades?

Insisting on planning every trade in advance takes intuition and spontaneity out of your trading, and depending on your personality, this can have deleterious effects to your profitability.

When is planning more trades right and good for you? It’s good for you to plan more of your trading behaviour if you suffer from the following typical behaviours:

  • Being unable to execute trades when you get the signal to do so.
  • Hesitating and then acting too late on signals, giving you a worse-than-signalled entry or exit point.
  • If you have a propensity to act on what someone else says without running your own checks and risk/reward assessments on it first.

If you don’t particularly suffer from these problems, and your performance is already good, it’s doubtful that following the “plan everything” advice would do you any good. The markets change and react very fast these days and you sometimes need sufficient flexibility to act fast.


3. Keeping a diary of trades?

Keeping a diary of trades where both entries and exits are logged, as suggested by many, is mostly totally useless advice. It’s often repeated by know-nothing analysts and marketers of financial services who hypocritically spout nonsense advice.

The reason why it’s useless, is that markets change all the time. The Elliott Wave patterns vary from instance to instance, and no two impulses or corrections will ever look the same as another one of the very same type.

In other words, what worked well in one ZigZag pattern, might not work well in the next ZigZag pattern. Same pattern – but the variations might defeat your previously successful behaviour if you repeat it again.

Thus, making detailed notes about all your trade entries and exits just sets you up for future failure, because the financial markets will not repeat the exact same behaviour again. Hence, you writing down what worked the last time, and then sticking to that, will probably lead you to a loss the next time. Again, ask the people who were impaled in the XIV fiasco recently.

Here’s what I recommend: Make sure you log your trade results. Record the name of the financial instruments, exit dates, the P&L for each position, your total P&L, and dividends received.

Keep track of your results this way, so you keep your risk taking in check (especially if you are currently experiencing a losing streak). But forget about noting “what works and what doesn’t work” – because the markets change over time to make currently profitable methods less profitable or useless, while currently non-profitable methods can suddenly become viable (and sometimes even wildly profitable).


4. No trading immediately after a big loss?

To not trade after taking a big loss, can be very bad advice, because some trading systems have their biggest drawdowns before an even bigger profit. Setting “no trading after a big loss” as a rule is stupid and inflexible.

Certainly, you need to be extra careful after taking a big loss, but if the loss was an expected possibility of an otherwise largely profitable system, then it’s easy to miss out on a profitable trade that might follow immediately afterwards.

Similary, setting “no trading in anger” as a rule is also potentially counterproductive. If you are angry while trading, but you’re not making any mistakes as defined by your analysis methodologies and trading guidelines, then the anger doesn’t have any real effect on your trading activities.


5. Don’t ever change your analysis methods?

This is stupid advice. The markets change all the time, as new competitors enter the arena daily. There are new discretionary, algorithmic, short-term and long-term traders entering the markets every day. This, combined with an ever-evolving technological, cultural and political backdrop & legislation, has an effect on the finer details of how the market patterns play out.

Sticking to one way of doing things forever is not smart. But neither is flim-flam-style jumping from one analysis service, indicator, news source, trading guru (most of which are totally useless frauds and/or front-runners stealing money from their unsuspecting clients/victims) to the next at a high pace a good idea. Find the balance.



Generic trading & investment advice will get you hurt in the long run. That’s because those of us who are consistently profitable traders 1) won’t reveal exactly how we trade except for huge sums of money that make up our potential losses from having our methods arbitraged out, 2) can’t really make someone else with a different personality successful with the exact same methods we might use.

In other words, the generic trading & investment advice out there is written by losers, not by the market professionals.

What I do here in my analysis service, is provide you with my view on how the financial markets are likely to act. But I won’t reveal exactly how I’ve derived my conclusions and views, and nor is there any guarantee that you’ll be able to transmute my opinions into profits for yourself.

While this admission might scare you away as a customer of my services, it’s the truth, coming to you from a professional trader and analyst. You can test my Global Elliott Wave Coverage subscription for only $9 for the first 30 days.

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Carl Malmberg
Carl Malmberg
Technical Analyst at EWT Investing
Carl has analyzed and traded the financial markets 13+ years.
Developer of the Extended Elliott Wave Theory, an extension made to the original Elliott Wave Theory.