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Why professional traders make money in the market.
Trading online is not that complicated as many beginners think. Once traders get to know the main reasons why professional traders make continuous profits, they realise that they already have all of the pieces of knowledge and skills needed for stable success. The only essential difference is that the focus has to be shifted from getting a short-term bargain to long-term profitability and stable performance of the trading account. Financial markets are much more predictable in the long run, and the only thing traders should do is cross the threshold of thinking. This article is aimed to show several amazing reasons why professionals are so profitable in the financial markets.
Since beginners spend too much time analysing market conditions and factors driving prices, they overcomplicate the trading process. What professionals do is just stick to their trading strategies and algorithms, finding only patterns and chart setups which are used in the trading systems. Other information is just noise for them as traders focus on own trading plan, executing entry and exit conditions. As a result, professionals do not spend that much time for analysis as beginners do, and avoid markets traps, which often look like a certain attractive background to enter the market for beginners. Professionals believe in what they see, but not in what they have wished to see or hoped to happen. Trading gurus often limit the flow of information to restrict spreading attention and focus on real chart setups and patterns. In addition, experienced traders know precisely when a significant event is going to happen in the market. Therefore, they do not stick to the trading terminals all day, having much time for other occupations, having fun with family, etc.
Professional traders do not believe the market, especially in terms of technical indicators. The main reason for that is related to the lagging nature of technical tools based on mathematical formulas, which take into the account past performance of the price action. However, experienced traders know that any technical indicator wouldn't become a decisive factor for the majority of traders in case if, for example, the fundamental environment changed, or a sudden announcement made by government officials. Indicators are used as a secondary tool just to whether to confirm or deny the current market’s sentiment. Of course, many traders across the globe can see let’s say a head-and-shoulders reversal pattern on the S&P 500 daily chart, and that factor might have an influence. Nonetheless, technical analysis is a secondary tool.
Profitable traders never listen to others. What they do trust is their own brain, experience and feel of the market. Trading robots, Automated advisors, talking heads in the television - all that creates an unneeded garbage for the brain before making profitable trading decisions. Some software might work effectively during some period when market conditions are stable. But once investors’ sentiment was changed, robots wouldn’t react adequately as all they have for analysis is just an algorithm to calculate some figures in the past. When it comes to fundamentals, of course, Non-Farm Payrolls and other essential economic events matter, but in reality, the only meaningful information is the market’s reaction, which is displayed on the chart with pure prices, free of misleading technical indicators. Therefore, experienced traders predict the market’s reaction to some event but not the event itself. Figures in the economic reports do not matter unless the vast majority of market players react on them, changing trading conditions and influencing the price action. That’s a perfect period to trade as volatility is the best friend of a profitable trader.
Several more skills are needed to trade in the money in the long run. First is the discipline, which suggests a certain list of rules. Professionals do not break those rules ever. Second, a realistic comprehension of money management is required as well. Pro’s never put all eggs in one basket, betting a huge percentage of their trading account balance on one position or asset, even if chances for profits are enormous and current price action is totally predictable. Unrealistic targets and wishes lead to crucial damage, and months of hard work could be eliminated by one single deal. At the same time, the trading capital, as well as a trader’s mind, has to be free from psychological pressure. For instance, some traders urgently need to make a certain amount of money, they go to a bank, take a loan and put that incredible and unaffordable amount to the trading account. As a result, such a trader will seek any opportunity to make money as fast as possible, but the market is not a cow to milk. Experienced traders trade only with a free capital, waiting for a moment when the market will be kind to allow having a piece of a bargain, and they take only what is given, never hoping for more. In that way, traders avoid the influence of two most dangerous emotions in the market - fear (of losing money or opportunity) and greed (when you require too much).
Trading gurus know that the most effective trading strategy must be the most simple. Some of them use pure price charts, watching the trading action during some active periods and making trading decisions on simple patterns and chart setups. Well-developed trade thinking, taking into the account several steps ahead and several alternative options for the trading scenario, hunting instincts - these are the primary skills traders must develop, while overcomplicating and too many analysing factors could interfere traders to pull the trigger in the right time, targeting a right prey. At the same time, experienced market players understand where their profits come from as money do not fall from the sky or swim out of the ocean. What traders gain is the same amount of some other traders’ losses. Sharks try to predict fish’s behaviour in order to have a meal. Therefore, profitable traders do not fight the market, they just take a piece of haul, which consists of beginners’ and amateurs’ money, as those will always exist in the financial world.