Are you a seasoned professional or an amateur forex trader with their head stuck in the sand? Your trading results will answer this for you! Face it, if you are not consistently profitable then read on and discover the key differences in how amateur forex traders and the professionals think but most importantly, how you can transform your trading from copying the winning minority.
Amateur Forex Trader Belief #1:
The amateur will be hell bent on making a fast buck with an insatiable appetite to make as much as they can in the least amount of time possible. Often in search of “The Holy Grail”, they will approach the markets with their expectations sky-high – plundering untold riches from simply clicking a few buttons. They will have a huge emotional attachment to the financial end result of the trade over and above the management and exit of the trade in progress. They will also have very unreal expectations as to what is achievable on a consistent basis as a “successful trader”.
The seasoned professional will embrace the long game accepting that smaller but consistent percentage gains on their capital over time is far more desirable than the boom and bust scenario of the rookie in search of the quick buck. They embrace the long game measuring their success in percentage gain rather than in monetary value or by counting the number of pips they have made and will look on at the cannon fodder in the markets as they blow up their accounts in spectacular fashion. Many experienced professionals though, would have been there too at some point in their careers.
Amateur Forex Trader Belief #2:
More will mean more to the amateur forex trader. They will place more trades over a shorter amount of time under the assumption that this will mean making more money and will be fearful of missing out. This will simply serve as a false economy as they will expose themselves to the noise and trading news spikes without necessarily exposing themselves to a well thought of technical trade set-up.
Less is more and more is less to the professional. They will embrace the prospect of sitting out of the market as much as they would if they had a trade running. They will view times of staying out of the market as an opportunity to preserve their capital (the first objective for any trader worth their salt) while times of being in a trade as being in the flow of opportunity of a potential gain where the probabilities of them winning are stacked in their favour.
Amateur Forex Trader Belief #3:
The amateur will blindly jump into the market without a plan or even thinking twice. It is likely that successes in other parts of their life will perpetuate an ego complex which will cause them to go into the market blind, conveniently forgetting that only 8% of traders regularly make consistently. Even though an initial flash in the pan win may spur them on to raise the stakes in their gambling crusade, this will become short lived. Without a plan, strategy or even a vague idea of what they are looking out for, the odds will be well and truly stacked against them.
Professionals will rigidly plan the trade and trade the plan. They will have a very specific trading strategy which will be set in stone and all possible outcomes are assessed before the trade is entered and managed. Their plan will consist of risk parameters, what specific price-action set-up needs to manifest itself before they even look twice, and the timeframe they will trade.
Amateur Forex Trader Belief #4:
The amateur forex trader will rationalise with themselves that the more they learn about how markets work, they better their trading will become. This is simply not the case. While there is no substitute for experience in trading even the most simple of strategies over time, the amateur will often make their life unnecessarily complicated by learning about topics which will serve them intellectually rather than practically. This may impress those who like to talk the talk but it won’t help them walk the walk! Their desirable to know everything about everything will ironically cloud their judgement when it comes to trading and the amateur will typically fall into a state of analysis paralysis.
The experienced trader will have the benefit of “time in the saddle” but will know that bucking down to their strategy of choice (one which resonates with their personality and availability) will serve them in good stead long term as opposed to subscribing to market commentary or rhetoric. They will keep things as simple as possible, embracing the “less is more” mantra. And no, they will not be asking themselves: “if less is more, how much more will more be?” They will have a very fixed view of the market and how their strategy fits within it.
Amateur Forex Trader Belief #5:
Any money made through blind faith will feed the amateur’s ego from the get go, but if they lose money, then they will consider it to be the fault of someone or something or else – usually the market. But that’s not it. It’s also likely they will blame the broker, their internet connection and the cat too…anything but them! A failure to take responsibility for their own actions in the market and treat trading as a business will cost them dearly.
The professional trader will take full responsibility for their own actions, accepting that whatever the market does…it will always be “right” in giving the optimal price buyers will buy and sellers will sell. It is through treating their trading account like a business which keeps them accountable and rigidly following their plan, treating every trading decision as essentially a business decision.
To create is effort, to copy is genius, the adage goes. It does not make sense to try and reinvent the wheel when it comes to trading – simply model the attributes of those who are doing it, but most importantly those who are actually going it well and showing consistency in their trading results.