Which life skills can be learnt from stock traders and trading?

Stock prices fluctuate only because of humans emotions. Not everyone can control reactions. Similarly in life, everyone behaves differently. The behaviors are often guided or motivated by culture, learnings, emotions.

Due to the involvement of feelings and emotions in trading, both are closely related and can teach us a lot about the key life skills.

Following qualities can be learnt from stock traders and applied practically.

1. Positive attitude

Professional traders are often not sure of 100% outcome. They work with probabilities and setups which provide them the required conviction.

Once a stock is purchased they don’t self doubt and hold on to the trade even during minor corrections.

2. Reading subtle signals and trends.

A great eye for detail is a prerequisite for a good trader. This skill is developed via hard work and dedication.

One should have the ability to read subtle signals.

3. Prepared for different scenarios

A trader is prepared for different scenarios. Before taking a trade he has already visualised them and thought of actions he would take in each situation.

To given an example, if the stock is consolidating it can either breakout, breakdown or continue with further consolidation.

Visualising different situations and being prepared for each of them is an important skill to develop.

Having different plans of action prepares you to face the worst.

4. Having patience

Holding on to a stock requires conviction and patience. It is not random and is carefully thought of.

Preparation, experience and knowledge give birth to patience.

A good trader will wait for his setup patiently. This wait can be for hours, days, weeks or months.

Similarly in life patient has to be inculcated. When facing a life threatening situation, be calm and composed. You should have thought about it beforehand

5. Hard work

Even the Talented need to work hard in trading. Good traders go through hundreds of chats every day in search of new opportunities. They have their own watchlists which they will monitor daily.

The basic tenet of working hard is often forgotten. It is often the most underrated of all the qualities but contributes the most to one’s success.

6. Identifying opportunities that matter

Traders have a unique knack of identifying opportunities with the most reward. They call it the risk reward of a trade. A trade is entered only if the reward is more than double.

Many of us don’t think about the risk and reward consistently. The important decisions are often guided by circumstances or culture.

7. Taking action when required

Hope is the enemy of action in the right direction. Great traders never really on hope. They would cut a bad trade without a second thought as they are able to identify the signal early on. Stop loss is a prerequisite.

In life, the right action is often delayed in hope that everything will turn out to be good. Many a times the issues becomes worst. Later an exit turns out to be expensive.

It is always better to search for signals and jump ship before things get out of hand. This can be a suffocating relationship, a abusive partner or job etc.

Initially any change would be difficult but the decision will be worth the efforts

8. Bouncing back from failures

Setbacks cannot be avoided. Often they are temporary and nessessary for another leg of up move. Consolidations are considered good by traders as it gives breathing space to price.

Good traders will not panic in the event of a failed trade. They will exit fast and search for another great risk reward opportunity.

9. Wrapping up

Trading of shares are a reflection of human emotions. Greed and fear can be prominently seen in the price movements of shares.

The lessons that a good trader offers can be valuable in life. It is important for us to learn control over ourselves and analyse our actions at frequent intervals.