Most struggling traders seem to think that making consistent money in the markets is an extremely difficult achievement that always seems to be just out of their reach. Well, in today’s lesson I’m going to let you guys in on a little secret; making consistent money in the markets is not as hard as you think. In fact, you may even be surprised to know that you probably already have the knowledge to trade like a pro trader; you just have to make effective use of it.
I want to hear from you!…leave me a comment after reading today’s lesson and tell me which of the 12 points below you need to work on the most or which ones helped you.
I find that most traders who can’t seem to make any consistent money in the markets already know what they need to do to become successful, but they don’t make proper use of this knowledge. All traders have the motivation to make money in the markets, but most are focusing that motivation on the wrong things. If I can boil down the primary differences between professional traders and amateurs, I would say this; pro traders are motivated by the long-term outcome of their interactions with the markets, whereas amateur traders are motivated by the short-term outcomes. Once you learn that you can only make consistent money in the markets by dropping the impulsive desire to “make money now”, you will cross the threshold into thinking and trading like a professional, and eventually you will become one.
Here are 12 surprising reasons why pro traders make money:
1. Professional traders don’t spend as much time analyzing the markets as you do
Perhaps you think you aren’t analyzing the markets ‘enough’ or that you need to read more economic news to make money consistently…I can almost assure this is not the case. I can also almost assure you that you are probably spending more time analyzing and thinking about the markets than most professional traders are. Pro traders know what their trading edge is without a doubt, and they simply analyze the markets at their favorite times to do so, look for their trading edge, and then either trade or walk away. Think about it like this; why are you sitting there wasting your brain power if your trading edge is not present? Maybe you don’t know for sure what your trading edge is? This brings us to number 2…
2. Professional traders trade what they see, not what they think or want to happen
Many traders get caught up in a game of becoming so fixated on a particular thing happening in the market that they convince themselves the market is going to do what they think or want it to do. This of course causes them to do stupid things like over-commit themselves to a position or over-trade.
Professional traders understand that they never know ‘for sure’ what a market is going to do; therefore they don’t become mentally or emotionally attached to any particular directional bias. They simply use their price action chart reading skills to determine the most logical and probable near-term market direction and then look for price action setups that agree with it. If they don’t see anything obvious forming that meets the guidelines of their trading plan, they go play golf, read a book, go to the gym, play with their family; but what they never do is trade just because they’ve rationalized some ‘trade setup’ in their head, simply because they have an urge to trade. Pro traders know EXACTLY what they are looking for in the markets, and they only trade when they SEE IT form.
3. Professional traders do not rely heavily on indicators
I realized early-on in my trading career that indicators were not only clouding up my charts, but my thinking too. It really wasn’t until I learned to trade with price action and I took off all the indicators that I really started to get ‘in-tune’ with the market. Professional traders know they need to have a thorough understanding of how to read a naked price chart as the cornerstone of their technical analysis skills.
Most traders go through an evolution where they start out looking for the “Holy-Grail” by trying every trading system, indicator, and EA out there, and then they either give up or begin to simplify their trading. I like to use the analogy of traders in the pits of the major stock and commodity exchanges; do you think those guys are looking at MACD, Stochastics, Elliot Wave or other “BS” indicators? Obviously not, they are reading tape, or price, they are basically just trading based off pure price action, and we can do that my taking off the forex indicators on our charts and learning to trade the natural price action of the market. (I know some of you are thinking that I do use indicators since I use a few moving averages, but I don’t use them in the traditional ‘cross-over’ moving average method, rather I use them to highlight dynamic support and resistance and for trend analysis, and I really only use the 8 and 21 day EMAs)
4. Professional traders rely on their brains, not on EAs or trading software
I know that many of you have been tempted to buy one of the fancy sounding Forex trading robots out there, with a name like “Forex Turbo Pip-Blaster 10,000”…what unsuspecting newbie wouldn’t be tempted? But what the guys or girls selling these ‘snake-oil’ trading systems aren’t telling you is that they are just programs that do the same thing over and over; they aren’t flexible and the ‘results’ they show you on their websites are either made up or back-fitted over a perfect sample of market history. In reality, the market ebbs and flows, and no computer program will make money as effectively as a human can over the long run. You need discretion and human brain power to navigate the markets successfully over the long run. Until we have true artificial intelligence the human mind will always be the best trading tool.
5. Professional traders don’t focus heavily on fundamentals
Whilst there are pro traders who do use fundamentals, I can assure that most do not. The ones that do use them do so because they are interested in the fundamentals more than anything, and they likely use them as ‘confirming’ factors for what they see on the charts. There is simply no real reason to rely heavily on Forex news and fundamentals because all of these variables are ultimately reflected via the price movement on a naked price chart. Sure, it’s good to be aware of the most volatile news releases like Non-Farm Payrolls or interest rate announcements, but beyond having an awareness of the timing of these releases in order to tighten stops or take profits, there is really no use in analyzing them in-depth. If you want to see how a news event or economic release affects a market, simply look at its price action, because all variables are ultimately reflected via a markets price action, so when you learn to trade price action you are indirectly learning to trade everything that affects it too.
6. Professional traders listen to themselves, not others
Did you ever enter the market because of something some “expert” on CNBC said? Honestly, did you? I bet you did, I’ve done it before, in my early trading days. It’s an easy mistake to fall into; after all, these guys and girls do seem to know what they’re talking about. But, the funny thing about the economic media is that you don’t have to look too long before you find another opposing “expert” opinion. If you read these people’s opinions long enough, you’ll soon either get a headache, enter a stupid trade, or just decide they are all full of crap. The latter is usually the best option. The point is this, you’ve got to make your own decisions in trading, and no one will ever care more about your money than you do, so don’t follow some “expert’s” advice if you feel in your gut that it’s wrong. Trust what the charts are telling you, not what some talking head on T.V. says. Professional traders are confident in their abilities and they don’t let other people influence them or make their trading decisions for them. Take everything you hear from the “experts” with a grain of salt.
7. Professional traders are realistic
You will not become a professional trader if you aren’t realistic about trading. What I mean by ‘realistic about trading’ is this; you aren’t going to make a full-time income from the markets right out of the gate with a $5,000 account. You need to consider how much disposable income you have to trade with right now, and then decide how much money you think you are emotionally comfortable with losing on ANY one trade, and then adjust your position size accordingly. You can’t just ‘run and gun’ and think you can get away with risking 30% of your account on one trade, hit a big winner and THEN worry about forex money management. That’s just not how it works. You have to be realistic and disciplined BEFORE you become a pro trader…you essentially have to “act as if” you are a pro trader before you are one…if you ever expect to become one.
8. Professional traders have a well-developed discretionary trading sense
As we discussed in number 4, humans have the ability to be much better traders than computers, because we have the ability to use discretion. There is something called a “gut” trading instinct that the best traders have, and it comes from time, education, and practice. Price action trading is a flexible and discretionary trading method, meaning not EVERY pin bar or other setup will be traded. Instead, we only take those that meet our trading plan criteria and that “look” right…how a trade setup looks to you depends on your discretionary trading ability. Eventually, you will develop it to the point that you instantly know whether or not a particular setup is worth trading just be glancing at the market quickly. You’ll need to use your discretionary trading sense to ultimately decide which price action setups to take and which to pass on.
9. Professional traders feel no ‘need’ or ‘pressure’ to make money in the markets
Above and beyond everything else discussed here, not becoming emotional as you trade the markets is the most important factor that allows pro traders to make money. If you feel like you ‘have to’ make money from your trading in order to be happy or have a fruitful life, you are probably relying on it too much. Most people who excel at trading don’t feel like all their ‘eggs’ are in the trading basket, and they won’t be homeless if they don’t make money in the markets. Essentially, you have to be at a point in your life where you are already happy and have a plan B to fall back on in case you don’t make it as a trader, this will naturally increase your odds of becoming a very successful trader. If we put too much pressure on ourselves to win on any one trade, the whole process of trading just turns into an emotional mess of losses.
10. Professional traders are organized and disciplined
You need to be organized and disciplined to harvest and maintain the proper Forex trading mindset. Having a trading plan and a trading journal and actually using them will go a long way towards turning you into an organized and consistently disciplined trader. Traders who think they don’t need to be organized or who aren’t disciplined, usually behave this way out of arrogance. It’s this same arrogance that will ultimately lead to their demise in the markets. When your hard-earned money is on the line you don’t want to assume you will ‘make a trading plan and trading journal later’…you need to do these things before you start trading real money, not after.
11. Professional traders only trade with disposable capital
This point applies to normal ‘retail’ traders (not investment banks and hedge funds). What is disposable capital? Basically, it’s money that you don’t need for any of your life’s expenses or for retirement or anything similar. If you trade with truly disposable capital, you will not become overly-attached to any one trade, and as a result you won’t become as emotional as you would if you were trading with money that you really needed for something else. The best way to get started in trading with an emotion-free mindset is to only use 100% disposable capital. So don’t go taking out a second mortgage on your house or borrowing money to trade, this is usually a huge mistake and often ends in tears.
12. Professional traders use simple trading strategies
Finally, many beginning and struggling traders are surprised when they find out just how simple most professional’s trading strategies are. Pro traders know that simple Forex trading strategies like price action are the best, because it’s simply unnecessary to analyze most variables outside of the natural price action in a market. They also know that simple trading strategies work to influence a simple and clean trading mindset, and one’s mindset is the most important factor to success in the markets. If you like the idea of keeping it simple (KISS) – I suggest you check out my Price Action Forex Trading Course, it’s full of simple yet effective trading strategies that will dramatically improve your trading decisions; find out more here.
Which of the 12 reasons that pro traders make money surprise you the most? Maybe you already knew everything discussed above but you just haven’t been implementing it? I want to hear from you! Please leave a comment below and give me your feedback.