What are professional traders doing that you’re not? Do they know something you don’t? Do they have some ‘inside information’ or some top-secret trading system that you have yet to discover? I bet you’ve asked yourself these questions or similar ones many times, because trading success can seem like a bit of a ‘mystery’, even if you’ve been trading for years.
The correct question to ask is, “How do professional traders think?”, because the primary reason any professional trader is successful, is because of how they think. Conversely, how you think about trading is the reason you may not yet be a consistently profitable trader.
In today’s lesson, we are going to go on a journey through a successful trader’s mind. I’m going to share with you how we need to think to succeed in the ultra-competitive and extremely psychological game we call trading…
Professional traders aim to control themselves, not the market
A professional trader lets the market come to him (or her), he doesn’t chase trades or try to force things. If a good trade forms that meets his criteria, he will take it. But if nothing forms, then he simply does not trade.
A professional trader knows exactly what he is looking for in the market because he has learned and mastered an effective trading strategy. He is anticipatory instead of reactive. Meaning, he knows trading is a game of anticipation, not reaction, so he plans trades well in advance, has a bias for each market he trades, has key levels marked and then waits patiently for obvious signals to form. This is how you let the signals ‘come to you’, instead of trying to force a trade when there’s nothing there.
Most importantly, professional traders understand that the market is only going to give them a certain amount of high-probability opportunities per month, and so it’s their job to scan the charts each day, as objectively as possible. By becoming a master of your trading strategy, you will have the ability to anticipate and plan trades like a professional. I promise you that every professional trader out there already knows what he or she is looking for, before they even open their charts each day. When you approach trading from this perspective, you are much more calm and relaxed, because you don’t feel like you ‘need’ to trade. You are already thinking that IF an obvious signal forms, I’ll trade it, but IF no obvious signals form, then I will come back to the charts tomorrow and check again.
Professional traders know emotions are the enemy of success
Professional traders understand that becoming overly-emotional about their trades is a quick recipe for disaster. It’s human nature to experience dramatic swings in emotional pain and pleasure when our hard-earned money is on the line. So, the professional trader knows he has to make an effort to curb the effects of emotion, otherwise he will lose a lot of money.
The most effective weapon for keeping your emotions at bay is simply knowing your risk tolerance, and never exceeding it. You have to place each trade knowing that you could lose, and you have to use this knowledge to adjust your risk to a dollar amount you know you’re emotionally OK with potentially losing. Only YOU can determine how much money you’re comfortable with potentially losing per trade, so you need to figure out what this amount is, and stick to it. You should not feel a lot of emotion whether you win or lose on a trade, and the only way to really make sure you don’t, is by managing your per-trade risk properly.
A professional trader acts with confidence and conviction, they do not second-guess their trading decisions because as we discussed above; they already know what they are looking for, so if they take a trade, it’s something they’ve anticipated and planned. Pro traders understand that their trading edge takes a series of trades to play out, and any series of trades will contain a random distribution of winners and losers. But, in order to see the profitability of their trading edge, they must STICK TO IT and let it work for them. Therefore, a professional trader thinks about trading success not only in terms of how much money they are making, but also in terms of whether or not he is executing his plan and sticking to his trading edge with discipline.
Professional traders don’t sabotage their own trading edge
A somewhat peculiar characteristic of struggling / failing traders, is that their behavior in the market reflects an underlying belief that they know ‘for sure’ what the market is going to do next. This is the only logical way to explain why so many struggling traders are over-involved in their trades by moving around stops and targets, adding to and reducing positions, etc.
The FACT of the matter is, no one knows ‘for sure’ what the market is going to do next. We can make educated guesses and ‘gut’ feel calls based on experience, but we never know ‘for sure’ what will happen next. A professional trader knows this, and they regularly think about it, whereas an amateur or struggling trader, thinks much less, if it all about it.
Professional traders let their trades play out with little to no interference. They know that the market is going to do its ‘thing’; swing around, chop around, surge higher / lower etc. At the end of the day, the pro trader understands that the trade either works out or it doesn’t, and in most cases they won’t touch the open trade as experience and screen time show that it does not improve the outcome.
Of course, there are some occasions for one reason or another, a trader may exit a trade early, but probably more than 70% of the time, most professional traders adopt a ‘set and forget’ trade mentality and just allow the market to do the ‘work’ and let the trade run its course. This is a mindset, it’s not ‘mechanical’, you just need to understand that if you let open trades play with your mind and emotions and exit before stops or targets are hit, it will have a detrimental impact on your long-term profit / loss as well as your overall trading confidence.
I know you probably already can relate to the feeling of interfering with a trade and creating a loss where there otherwise would have been a winner. There’s NOTHING worse than this feeling. Professional traders know this, and so they rarely mess around with their trades. They know that they are more objective, rational and logical while they were planning the trade / before they entered, so they trust their judgment in that state of mind rather than when the trade is live. They let the market do the ‘work’.
Your trading mindset determines your trading habits
How you think about trading ultimately develops into your trading habits, or how you trade. If you think you can ‘avoid’ losses, you’re going to develop a habit of not trading with a stop loss, moving stop losses further away, adding to losing trades etc. If you think the market is some ATM machine, there for your every wish and desire, you’re going to over-trade and over-leverage your account and quickly blow it out.
A professional trader has respect for the market. They know they don’t know everything and they think far more about risk than they do about reward. They think about trading in terms of anticipating obvious setups and planning what they will do before they do it, so there are no surprises. Thinking like this influences proper trading habits which ultimately leads to profitable trading decisions.
Professional traders are patient people who anticipate trades and plan in advance, they believe in their edge and execute their trades with confidence and ice cold blood in their veins. They manage money and don’t become attached to the money or any one trade. Screen time, experience and the school of hard knocks (real world experience in the market) will improve your performance over time, but only if you develop the thinking patterns outlined above in this lesson, I should know, I have 12 years of trading experience and over 15,000 students. If you want to learn more about professional trading strategies and how a professional trader thinks and trades the market, checkout my Price Action Trading Course for more information.