Psychological Traits of a Successful Trader – Self-Attribution
Arslan Butt • 3 min read
What's up, FX junkies. You must be enjoying the first weekend of December. Christmas is around the corner and this month will be slightly calmer than usual. In this article, I will be sharing a few psychological traits that will surely help you achieve remarkable trading results.
Before you read this article, I'd like to share that I'm a practitioner of Behavioral Finance and it's the major area of research in my Ph.D. In particular, I'm studying the investor's psychology and how their decision-making behavior is influenced.
Being an FX market analyst and Ph.D. scholar, I often hear a very common question, “What are the traits of successful traders that unsuccessful traders lack?" Personally, I am also interested in this.
Over the period of two years, I have worked on trading behaviors of forex, commodity and index traders. Mostly collected data through primary as well as secondary sources. The target population was traders around the globe especially from Asia, Middle East, US and Europe. The idea was to identify and filter the traits of successful traders.
Are you ecstatic to grasp these traits? Well, here we go:
In the study of behavior, we have encountered many traders who are prone to self-attribution bias. What is bias? Google says its unfairness. But unfairness to whom?
Well, the bias is a human error. Human beings are emotionally biased creatures. You, me, in fact, all of us exhibit emotional biases without being aware of it. It’s one of the very important traits of successful traders that they are not biased. They know their true capabilities and skills. They work on their weak areas while admitting their weaknesses.
Always be honest with yourself. Sometimes, we close our eyes and don’t admit our weaknesses. Based on my experience, I advise you to recognize your flaws, work on it and try to improve.
For instance, if you lack knowledge about fundamental analysis and how they impact the market then I recommend sparing some time to understand it to avoid major losses. I used to hide my flaws not only from others but also from myself. Then one fine day, I realized that it’s only me who can help myself, so I need to work on it.
Successful forex trading demands experience and knowledge like any other business. So I suggest you identify and confess your weak areas, spare time to learn, practice and adapt things because that’s the only way to achieve consistent success in the FX market. Refer trait No. 2 for more understanding.
This is something I found really common in all of us. Interestingly, we can't help ourselves until we know that we are exhibiting this behavior. Okay, now let me explain self-attribution to make this picture more clear.
As I define in my research publication, "The self-attribution bias is a long-standing concept in psychology research and refers to individuals' tendency to attribute successes to personal skills and failures to factors beyond their control."
Just answer yourself, are you also one of those who takes credit for all their positive trades and looks for external factors to blame for losses? I'm sure by now you know yourself.
How to Deal With Self-Attribution?
It's a bit hard to deal with behavioral biases, but not when you admit your mistakes. For instance, if your trade hits take profit, ask yourself the same question. Is that because of your analysis and skills? If the answer is yes, it's good. But if the answer is no, try to figure out the reason behind the success of your trade. By doing this, you will be able to take the trades whenever the same reason appears in the market.
Besides this, if your take hit stop, take credit for it and admit the fact that it's you who was wrong with analysis and again look for the reasons behind the wrong trade. By doing this, you will be able to avoid the trades whenever the same reason appears in the market. That's it for now, but I will be sharing my experience quite often to help you out with psychological trading. See you tomorrow for real-time market updates.
Good luck and enjoy your day!