The market is an ever-changing entity, each day presenting us with different and unique scenarios with no two days ever the same. Nevertheless, the market is more or less a reflection of people's ideas and attitudes, and while it is also true that no two people are alike, each and every one of us has something in common with someone else, whether it is the way we get out of bed in the morning or the foods we prefer to eat. Additionally, we tend to repeat actions such as preferring to brush our teeth at a certain time of day or making sure we try to catch the Thursday night prime time television shows. No matter which angle you look at it from, humans are creatures of habit and this tendency gets reflected in stock movement. It's what makes technical analysis a reliable and profitable way to trade.

Unfortunately, technical analysis is not always cut and dry. The same core pattern does not work the same in every market environment. For instance, one of the setups I often look for on a daily chart is a pullback in an uptrending stock for buying opportunities. Where newer traders tend to get in trouble, however, is taking such a setup to mean that every time an uptrending stock pulls back at all and then breaks the previous day's highs that means they should enter long. In reality, there are always exceptions and it's learning what these are that can be the dividing line between those traders who are successful and those who fail. In this example, how a stock pulls back in a primary uptrend, as well as overall market conditions will greatly influence whether taking such a pullback as a long is really worth the risk to reward. In some cases it is not.

The ability to adjust to changing market circumstances is just one of the traits of a successful trader. In reality though, there are quite a few. Something that I've found helpful is taking the time to look at other successful traders and trying to identify characteristics that may have contributed to their good fortune. In addition to being able to adapt, there are about eight more things that I have observed about successful traders.  I reveal the first four below:

1. They stay neutral.
2. They have a business plan.
3. They keep a journal.
4. They focus on 1 to 3 techniques that suit them well.

1. Stay Neutral
You're probably wondering away just what do I mean by that? You know the guys you see where if they take a loss of $100 the whole world is out to get them and if they make $100 they are on top of the world? Well, they definitely are not neutral. They let the market control their emotions. The professionals don't let the day to day oscillations in their accounts phase them. The results of one week don't matter much, nor do the results of just a month. They are just small fractions of time in their career. It's the average over time which is important. With great traders, it's hard to tell their good days from their bad days because their attitude remains, for the most part, unchanged. They don't go touting to every message board and chatroom they can find how they just doubled their account and should be worshipped for their success. Nor do they whine about how the market makers or specialists have it out for them and they can never catch a break. While no one is a robot, completely devoid of emotional response, successful traders generally have learned to control the swings, thus leading to more objective trading.

2. Have a Business Plan
Next, successful traders have a business plan. Trading is a business and it should be treated as such. Would you open a restaurant with out a plan? No, or at least I hope you wouldn't or you're not likely to get very far. Restaurant owners need to have a plan. What type of food to serve, start up costs, hours, etc. are just a few of the questions they must address from the start. Trading should be looked at in much the same way. In your business plan you should list any number of things:
When you will work?
What techniques you will focus on?
What your expenses will be?
What is your maximum loss?
What are your objectives? 
 
Make it as comprehensive as possible. It will help you out more than you might think.

3. Keep a Journal
So many times I will call a person that tells me they have been having a hard time and one of the first questions I ask them is, "What have you been trading?" If they can't tell me that, then it's hard to move forward. It's hard for me and it's hard for them. Keep a journal of all the trades you take. Include the time you got in, out, the prices, why you took the trade, what was going on in the market, how did the stock act, what did you do well, what could you have done better, etc... It seems like a lot, but once you get into it, it's really very easy and just becomes second nature. Read this a few times a month and just look at what you are doing and have been doing. It will really key you in on your weak areas. It let's you know what you need to work on and, just as importantly, it will let you know what you are good at. So, keep a journal.

4. Focus on 1 to 3 Techniques that Work Well
Another trait of great traders is that they usually focus on just a few techniques, usually 1 to 3.  The reason for this is simple: The jack of all trades, master of none is usually a low paid, unskilled worker. Put another way, examine college students. What kind of people major in general studies? Unless they go on to focus on a specific occupation in graduate school or law school, etc., well-paying jobs will be hard to find for most upon graduation. Instead, for those who focus their studies in one field, and more specially, one subdivision of that field, demand for their skills will be much higher. If you focus on just a few techniques, it allows you to really become an expert on the technique you are using. Great traders have a few core techniques that work and they use them over and over and over and over again for as long as they are profitable.

P.S. I'd love to receive feedback from you. Please leave a comment or discuss the article by clicking on "Make a comment on this article" below.

Toni Hansen is President and Co-founder of the Bastiat Group, Inc., and runs the popular Trading From Main Street. She can be reached at Toni@tradingfrommainstreet.com.