All That Glitters / Ten Features of a Successful Trader

A good way to learn the principles of investing is to study the activity of the great traders of the world.

Most Israelis don't fall into the category of "investors" in the capital market, let alone "traders." A more appropriate classification would be "saver." Then there are the ones whose main occupation is to buy and sell securities. They are the traders and the rules of the game are completely different for them than for a person saving for old age, or to put the kids through university.

In what, exactly? A host of things. There is a vast range of trading methods and styles. Some believe in technical analysis and others think that's balderdash and rely on thorough research. Some build their strategies using computer programs. Some hold onto positions for weeks and others get in and out several times a day.

There's no one method for all, but there are some principles that hold true whatever method you use. A good way to learn the principles is to study the activity of the great traders of the world.

That is what Jack Schwager, manager and partner of the asset management company Fortune Group, did. He interviewed dozens of the best-known traders in the United States and published his findings in two books, "Market Wizards" and "The New Market Wizards."

Ultimately Schwager nailed down a list of 40 characteristics that, in his opinion, you have to have to succeed in stock market trading. Here are the 10 most important ones.

It could be better research, more accurate information (legal, one hopes) about market developments, or the ability to reach decisions and make moves faster than the rest of the pack. Or the trader could have better mathematical formulas, or bigger credit lines.

One other thing: A trader who doesn't know what his relative advantage is has no relative advantage. He will lose his money.

Good rules of thumb include (a) Don't risk more than 1% to 2% of your capital in any given transaction. (b) Decide on your exit point before making the investment. (c) If you lose a large amount, say 10% to 20% of your capital - stop. Take a breather. Figure out what you're doing wrong.

I don't know. Nobody does. Opinions differ. Schwager thinks that the few who make it big have a combination of experience and hard work - and congenital talent that others don't have. You can become a pro with just experience and hard work, in his opinion. But you won't break into the clique of the best.