I am relatively new to trading but have about a decade of investing experience. Thanks to Zerodha for offering me great a platform and cost structure that helped me transition to an above average / profitable trader. Now I am a full time trader.
After juggling through the mine field of trading for a while and glancing through few classic books on trading, I can’t help but keep comparing between a mindset needed for an Investor and a trader. One striking difference is need for cutting losses. When I was only investing, my approach to loss was that “I will die with the loss but never sell my investment at loss". At least that is how I felt about the famous quote of warren buffet’s first rule - Never lose money”. But in trading, it’s all about cutting losses early. Although all the books I read was unanimously insisting on this very important risk management practice, me like every other trader had to learn it the hard way.
The most important trait for a trader according to me however is having the stomach to ride a wild animal - also respectfully called Mr.Market. I realise that to be successful in trading, one has to be a maverick, who is ready to jump head first, based on his hunch which at times can easily kill us - financially. But my experience is that being afraid of market, taking too many precautions, waiting too long to jump does not help either. It will equally destroy the traders.
I have made profits in a market which was moving against my hunch and also made losses in market which was in the same direction as per my prediction. Ultimately it comes down to the trick (or skill) of mounting and then dismounting the wild animal just at the right time.
But one thing is for sure. Those who don’t have the stomach for riding the wild animal have no business of being a trader.