Professional traders succeed making money in the markets because they are doing something different from you. It is possible for you to make money in the trading markets but you need to know what the professionals are doing differently from you. You can learn what they are doing differently by reading this article.
A typical day for a professional trader is probably different to your own. They may think about how they are going to make their money, and what they do with their time. A novice trader may be rushing to find a trade and not have a proper trading plan. A professional trader may have a well-planned trading strategy and therefore do not have to worry about how they will make their money.
The mind of a pro trader and how they think
As a professional trader, you need to have a proper trading mindset to be a profitable trader. They have identified and worked on solving these psychological issues to become a better trader & person as a result. Developing a profitable trading mindset is a requirement to become a professional trader. It’s something you must work on; it doesn’t just ‘happen’. It begins with education, with learning about common trading pitfalls and understanding why you make them, then develop a plan of action to combat them and hopefully, to defeat them forever.
You can make a profit without being in a trade
This is a topic that is far too often overlooked. The majority of traders are not day traders, it is not because day trading is difficult to succeed at, and it is because day trading is extremely difficult to succeed at. Most pro traders are patient, who know what they’re looking for. So, professional traders do not think about the market from the mindset of needing or wanting to be in a trade. The primary difference in mindset between an amateur and a professional trader is that the professional has no urgency in his trading approach. He or she is simply playing the game because they want to win at it, not because they are ‘trying’ to make money. Making money is a by-product of doing everything well enough to win.
Professional traders trade when most people are afraid to trade
Professionals will tend to trade when the majority of the others won’t. Professionals are in the minority so they often make more money than the others.
The professional trader will be able to make a profit by buying into a ‘very high’ uptrend and selling into a ‘very low’ downtrend, whereas the amateur trader will be trying to pick the top or bottom and continuously get stopped out for losses as the trend inevitably continues.
The strategy of a professional trader
Professionals have a strong trading edge when to enter the market and this edge is developed over years of experience, and a lot of trial and error. Technical analysis is a tool that is used to develop this edge and is often used as a complement to fundamental analysis. This combination is a strong edge that can provide a strong advantage over the market.
If you are confident in your trading strategy, you do not doubt it. If you do, it may be time to re-think your strategy and learn a new one.
The crocodile and sniper analogy
We only trade if we are confident that we have an edge over the market.
Capital and risk management
If you are losing money every day in trading, then you must understand the importance of risk management. You must understand the importance of capital preservation. You should have an exit strategy in place for every trade you take. Professionals understand these things and they have plans for them.
Trading correlated securities
You need to understand market correlations to a certain degree, so you are not taking on too much risk. By trading two markets that are highly correlated, you will double up on the risk you are taking on.
Be aware of the current market volatility and adjust stop distance
Market volatility is something that traders are aware of and therefore they adjust their approach based on that. The more volatile the market, the less patience they would have to wait and therefore they would not use the same stop loss distances or profit targets. In a volatile market, they would use shorter distance stops or would set a smaller profit target.
Trading plan
Your trading plan must have a solid base of all three aspects we have discussed above; mindset, method and money. This is the base that you must build your trading plan on. Without these three factors, you will not succeed. If your money management is off, even if your strategy and mindset are on point, you will fail. The same goes for the other aspects; if one of the three is off, you won’t make it.
Professionals are learning new things every day
It is important to be humble and learn from more experienced people on regular basis. A hallmark of a successful person is not that they know a lot, but that they are constantly learning. A person who is not humble is not an intelligent and successful person.
People who think they know all there is to know will always be poor, even if they have money. A wealthy man is humble and knows that to make his wealth he must continue to learn. His thirst for knowledge and personal growth is insatiable. So if you really want to start making money trading, learn to trade, keep learning and never stop.