The Distinguishing Traits of Professional Traders
If you want to become a successful trader, the quickest way to do so is to learn what other successful traders do. That is true of anything in life, but especially so in trading, because you largely have to self-educate yourself in this field. There is no “trading” major at any university. Most of what it takes to succeed at trading is learned through trial and error or the ‘school of hard knocks’.
In order to become what we want in life and to achieve what we want to achieve, the quickest route has always been to model ourselves after those who have already achieved it. You will probably cut years from your learning curve if you study professional traders and learn their distinguishing traits. In other words, what makes them, them? Why are they so good at trading whilst most people struggle? To find out, we’ve compiled a list of some of the most important factors and traits that allow professional traders to consistently take money from the ‘herd’ of amateurs…
I cannot say enough for having a premediated trading approach. Every trader gets stuck in a phase where they don’t think they need to premeditate their trading approach. In other words, they think they can just ‘run and gun’ and ‘later’ they will start premeditating everything more. Unfortunately, this is not the proper trading mindset, and ‘later’ never comes, because without premeditating your trades, it never can come.
Let me clarify; by premeditated approach, I mean that professional traders know what their trading strategy is before they enter and they have everything planned out. They know what their entry signals are and when they are present in the market, they know what their dollar risk per trade is, they know what their trade management technique is, and they know what their exit plan is.
Simply put, the human mind cannot function properly in the world of never-ending temptation that is the market, if there is no premeditation. When you approach the market without a premeditated strategy, you open yourself up to over-trading, risk too much, not taking profits, mismanaging trades, etc. The only way to tame your own mind in regards to trading, is to plan out what you’re going to do before you do it and try to stick to it.
Just how do you stick to that premeditated approach? Professional traders know that discipline is the glue that allows you to stick (pun intended) to your trading approach. I am not talking about your everyday run-of-the-mill casual person’s discipline. I am talking ‘sickening’ discipline; the type that most people simply cannot achieve or maintain.
Professional traders understand that everything hinges on their ability to be disciplined. It’s what really does separate the ‘men from the boys’ in trading. You’ve got to be disciplined to continue to execute your trading edge just as you should, no matter what happens; win or loss. You’ve got to be disciplined to stick to your risk per trade and not crank it up or down just because your last trade was a winner or loser. You’ve got to be disciplined not to check your trades a thousand times a day, at night and in your sleep on your smart phone. All of the mistakes that amateurs make that cause them to lose money, are a result of lack of discipline. Professionals know this.
If you have an effective trading edge like my price action strategy, and you can remain disciplined with it over a large enough series of trades, eventually you will come out on top. Most people however, cannot do this, and that’s why most people fail at trading. To be in the 10% of successful traders, you’ve got to crawl outside of your ‘box’, outside of your comfort zone, you’ve got to dig deeper than the amateurs who continuously give their money back to the market. You’ve got to see the ‘forest for the trees’ and stick to your trading plan with a religious sickening discipline that most people simply cannot achieve.
If that sounds harsh, it’s supposed to. Remember, when you’re trading, you are operating freely in an arena of never-ending temptation to do yourself financial and mental harm. It takes this type of discipline to overcome this temptation and truly take advantage of the opportunities the market presents.
Understanding the maths
Professional traders understand the math behind their trading success, and this is one big reason they are able to remain disciplined. As I discussed in my article on the key to lasting trading success, trading success is about thinking in probabilities, rather than certainties. Trading is a game of probabilities, and until you fully believe that and start thinking about trading in terms of probabilities, you will not find success.
For example, you may know that your trading edge / strategy has an overall winning rate of about 50%. Meaning, you can expect to win half your trades and lose half of them. However, the key here is that you don’t know WHICH trades will be winners or losers. Meaning, just because you lost on your last trade doesn’t mean you’ll win on your next one, and vice versa. Just like a coin flip, you could get tails twenty times in a row before you get a head, but if you flip that coin long enough, you will eventually get 50% tails and 50% heads.
In trading, you have to forget about the result of your most recent trade, you cannot let it affect you. This is essentially how you think in probabilities. You are focused on the outcome of a series of trades, rather than the outcome of any one trade. This is what professional traders are focused on. Amateurs on the other hand, become far too focused on ‘this’ trade or the results of their last trade, and they let it influence what they do on their next trade, i.e., they become emotional. This is a big reason why they fail.
The math of trading is not just about thinking in probabilities though, it’s also about understanding risk reward and position sizing. Now, don’t be afraid by the term ‘math’, I know some people don’t like math, but this is really not complicated math. It’s just important you understand this stuff so you realize trading is also about the underlying math and how it plays out over time, not just about entry signals and charts.
Understanding the psychology of markets and market participants
Another distinguishing trait of professional traders is that they understand the psychology of the market and of market participants. This means they understand how other (amateur) traders are likely to think and act given the current market conditions, and they (pros) will generally then do the opposite. The market is designed to fake you out and to suck in all the amateurs right before changing direction. Professionals know this and they take advantage of it.
More importantly however, professional traders are aware of their own psychology as they trade and they are constantly monitoring themselves to make sure they are following their premeditated plan and acting on logic and objectivity and not emotional impulse. You have to be able to objectively self-monitor yourself as you trade, if you don’t, you will quickly lose your discipline and spiral out of control.
Pros don’t try to avoid losses
That ability to not avoid losses, but to take them and realize they are just ‘part of the game’, is something that all professional traders have. Beginning traders will often try to avoid losses altogether by doing terrible things like trading without stop losses or hedging their trades or trying to ‘make back’ money they just lost on a trade. What they don’t understand is that as a trader, you can never avoid losses, they will happen one way or another. The more you try to avoid them, the bigger and more painful they will be when they do happen.
Therefore, it’s best to just learn how to control and manage your losses and look at them as the ‘cost’ of doing business in the market. The sooner you accept this and start working on it, the sooner you’ll start making money and become a more consistent trader.
Well educated, well read and well planned
Professional traders know what they are doing. They know what they’re doing because they have educated themselves on how to trade. Let me be clear, I am not saying by any means that you need a college education to be a pro trader. In fact, many successful traders never finished college or even went (including me). What I am saying, is that you need to self-educate yourself by reading, studying and getting training from an effective source.
You can learn a lot from other traders, but you probably don’t know any personally, so you can learn to trade from online sources, like mine, where you’ll also meet other like-minded traders. You need to become educated on how to trade, and this is what you will learn in my courses and members community. Understanding how to read the charts, more specifically, the price action on the charts, is key. I teach this, and I have developed it into a trading strategy, so you will learn both how to read the charts and figure out what a market is doing, as well as find price action entry triggers into the market.
It’s critical that if you don’t learn to trade from me, whoever you learn to trade from teaches you how to understand the market, and doesn’t just give you entry / exit signals. Relying on someone else’s signals to trade from is analogous to driving a car blindfolded while taking instruction from someone else on where to turn, how fast to go and when to stop. It would work for a while, but eventually you would end up crashing your car.
In trading, you have to know how to read the charts to be able to ‘see’ where the market has been, what it’s doing and what it might do next. All professional traders know how to do this, and they know it because they know how to read and interpret the price action. If you would like to learn more about the ‘art of reading price action’ check out my price action trading course here.
22 Comments Leave a Comment
DISCIPLINE , The key word.
Thanks Nial…. I am an amature but I’m glad i am learning from people like you. You cannot imagine how far learning from you have gotten me. God bless.
There is a an old axiom that states” if you spit against the wind you spit on yourself”.Thanks alot for such informative article full with nothing except the truth.Hope my fellow traders will stick to the knowledge that Nial has imparted to us. Good trading comrades.
I’ve been at the edge on a couple trades lately. I’m making adjustments to give better opportunities and control to win. You went down the list in this lesson. I needed the reminder. Thank you.
Always inspiring. I justt come back on the fact that “There is no “trading” major at any university”. Well, I had one at EDHEC Business School, MSc in Financial Markets, Major in Trading. Eventhough its ranked 3rd worldwide I have to admit that it was not sufficient for success. I think this is because trading requires a whole mindset change and humility while those type of schools like to repeat to you every single day that you are part of the elite which is totally counterproductive in trading.
It never ceases to amaze me the absolute clear view Nial has -and freely shares with us- of what it takes to become a successful trader, and how he describes the pitfalls to avoid. The most important factor is that what he teaches comes out of his own play book. He is a successfull trader and wants us to model our actions after his, so we too may be as successful. Thank you, Nial. Keep it up.
Brilliant article Nial. Thank you.
Many Many THANKS for your valuable articles on Trading.
It helps us improving our trading in many ways.
Great articles to help traders keep laser focused, like a race horse with its blinders on, seeing only it’s line on the race track. Thank you.
This article is one of the most amazing thanks Nail for publishing this article you made love this business even more no more fears of loosing thanks so much
Thanks a lot Nial…you are the Man…I really like your PA strategy. Keep it up and continye enlightening
Thanks Nial for the good article. It’s always great to get information from someone with lots of experience. Have a good day!
It’s really a worth article
It’s all about planning the trade and trading the plan, thanks Nial, your weekly articles are keeping me on track
Yes.. Spot on again. I’m back on a demo account and your advice is proving right but an still a long way from giving in to temptations.
Great words of wisdom Nial ! … Success in trading comes from self-education, but only so after following those who have achieved success in the field ! … Because there are so many ways to get lost in the process without knowing being almost there and not having the slightest clue about it ! …
Brilliant write up as usual Nial.
“Amateurs Practice Until They Get It Right; Professionals Practice Until They Can’t Get It Wrong” Unknown.
Thanks Nial, you are ” The Man ” when it comes to mentorship. I have learnt to trade prifitable now through your persistant help. It takes a long time but it is worth the effort and i am now enjoying trading as well as making money. You are one in a million, i take my hat of to you for value and leadership.
tanks Nial. your articles are always enlightening n informative. kudos to u my mentor
Nice articles ..help me to be on track ..Thanks a lot
Thank you Nial for your mentorship. Your PA strategy has greatly improved my trading and returns. I can’t thank you enough. God bless you loads. We love you.