The key to successful trading

Businessman

Two of the most respected businessmen in Warren Buffet and Bill Gates have shared their thoughts on the primary characteristic required to succeed, and they are on the same page too. Indeed, both men consider focus as the preeminent feature behind both of their distinguished careers. Buffet has always been one to hone his focus exclusively on the business world, forgoing other hobbies and pursuits. Similarly, Gates’ disciplined nature allowed him to target a specific task rather than try span his ideas across multiple channels. Going against the notion that being a ‘jack of all trades’ would bring success, instead, focusing on specific areas has foretold the success of their own businesses.

 

Similarly, in the investment world, it is not by coincidence that focusing on specific stocks or companies deliveries greater success than trying to cover too many at one time. With every trader hoping to outperform the market, and with over 3000 stocks spread across the US Stock Exchanges, specializing in one area and becoming an expert in said field naturally places you at an advantage in understanding the companies you focus upon. As a trader, trying to keep track of any more than 10 stocks will result in you losing your focus, as one’s ability to understand the business’ fundamentals and keep abreast of news is limited. Most importantly, fundamentals and technical should go hand-in-hand, otherwise you risk overlooking one side of the story that can drive the stock’s movement(s). Similarly, attempting to diversify through too many types of trading instruments goes against the principle of focusing – whether it be commodities, stocks, options, forex or futures – each operates to a different pricing model and their appropriateness depends on the specific individual.

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BusinessmanWhat should also be pointed out, however, is that while focus is the central trait for success, it needs to be accompanied by hard work, time and composure. During my career, I’ve seen many traders enter the industry with the expectation that they will become rich overnight – if they don’t, they often draw the line and move on. There is certainly no ‘get rich quick’ strategy to trading, and patience can’t be emphasized enough. After my initial success, it was 3 years before I was able to consistently profit as a trader. Through hard work and a passion for the industry, however, one only needs to focus on being an expert in one area to set themselves up for successful returns.

Mike Ser