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In today’s episode, you’ll discover the 7 things professional traders do that losing traders don’t.
So listen to it in right now…
The Best Trading Books of All Time
How to be a Consistently Profitable Trader
Hey, hey, what’s up my friend? In today’s episode, I want to share with you 7 things that professional traders do that losers don’t.
1. Be open to learning
So you can’t think that your trading methodology or strategy is the best and you can forget everything else.
Take me for example, I started with price action trading. And for quite a long time, I thought that this is the best way to trade the markets, no indicators and just using price because the price was all I need.
Now, don’t get me wrong, there’s nothing wrong with price action trading. But if I were to stay with that belief, then it’s going to limit my growth as a trader because I wouldn’t be exposed to other different trading methodologies, like trend following.
This is another method that I’ve learned along the way because I told myself I had to be open about trading, I had to learn what other traders are doing, what are they finding success with and see how I can replicate them.
Then later down the road, I got involved with systems trading. In systems trading itself, there are multiple ways you can trade the market, you can do it short term, you can do mean-reversion trading, you can do momentum trading.
So have an open mind, because when you have an open mind, you get to learn more ways that you can trade the market. What this does for you is that eventually, you’ll have a portfolio of strategies or systems to trade the markets.
And when you are trading multiple systems this will help you improve your overall trading results. Because if system A doesn’t do well, then there’s a good chance that system B might be doing well at that time.
So your overall equity curve is smooth over time because some systems that are doing well can compensate for other systems that are doing poorly.
Whereas if you just trade one system or one strategy and if the market condition isn’t suitable for it, then your entire portfolio will go into the red.
So you have to be open to learning because this will really elevate your trading results.
2. Know when to stay out
Doesn’t matter whether you’re a discretionary trader or systems trader, you must know when to stay out of the markets.
For example, let’s say you’re a trend trader, and you buy dips in the stock market. If the stock market is in a bear market, then you need to know when to stay out of the market. You want to avoid buying pullbacks if the overall stock market is in a downtrend.
And one simple tip I have for you is this:
If a stock is trading below the 200-day moving average, you’re better off not trading that stock because chances are that stock will continue heading lower.
3. Know that you can be wrong
Even though you might be sure about trading setup and thinking, “All the stars are aligned Rayner, the moon, the sun, the asteroids, they all align! This market is gonna rally up for sure.”
Well, guess what? Nothing is for sure in trading, nothing is guaranteed. The president could just come up on the news and say something, and the market could collapse in an instant.
Yes, the stars can be all aligned, but it doesn’t mean that the market will behave in a way that you expect it to. Always be prepared that you could be wrong, even though all the stars aligned.
And once you know that you can be wrong, this brings me to my next point…
4. Manage your risk
Because if you accept that you can be wrong from time to time no matter how good your trading setups are, then good risk management will ensure that whenever you put on a trade, you won’t be betting the farm.
Because even if it’s a loss, it will just be a fraction of your trading account, you won’t go bust just like that.
So number four is managing your risk. Next…
5. Trade with an edge in the market
I can’t emphasize this enough. And this hit me hard when I read the book Market Wizards where Jack Schwager was speaking to one trader.
And the trader was saying, “Hey Jack, isn’t just risk management, a minimum of 1:2 risk-reward, risking 1% of my account and psychology enough to be a profitable trader?”
And then Jack went on to reply, “The best example of this for you to go down to the nearest casino. You can have the best psychology, the best risk management, you can even bring down a psychologist with you. But guess what, eventually you’re still going to lose money to the casino. Because the house has an edge over you.”
Without an edge, everything else is rendered useless. Everything else is secondary. And this is the same for trading. You must have an edge in the market, you must have a strategy that if you execute it repeatedly, will generate a positive expectancy for you.
So this is important, trade with an edge in the markets.
6. Execute relentlessly
Once you’ve defined your age, once you’ve adopted proper risk management, what’s left to do is to execute relentlessly. Whenever there’s a valid trading setup, you take the setup again and again, you never miss a single one of these setups.
This is what I mean by trading like a robot, executing relentlessly. Because once you start cherry-picking your trades and go, “Oh man, I don’t feel too good man. I don’t think the market is going higher. Let me just skip this trade.”
The trade that you’ve skipped could end up being a monster winner and bring the P&L of your account into the green. But just because you weren’t feeling too good, you skipped that trade, and your account remains in the red.
So yes, you can be trading with an edge, you can have proper risk management, but without executing your trades relentlessly, your results might not be the way it should be.
7. Be humble
You mustn’t let the highs and lows of your equity curve reflect how you feel.
For example, let’s say you made a killing in the market and you’re up by 30%, 40% this year, you shouldn’t be too overjoyed. Because when you underperform, then that happiness that you had will reverse down much lower and bring you to your lowest point.
Because when you’re having a loss, you don’t feel good, your emotions will also reflect the way you are. So the happier you are when you’re up there, the deeper you’ll fall when you’re down.
So you don’t have to brag nor show off. Just be humble, stay neutral and take what the market gives you.
When you are neutral, the highs and lows of your equity curve won’t affect you too much. And this is important because this is what will keep you executing your trades consistently over time, day after day. Be humble, be neutral.
That’s how you get longevity in this business.
Here’s a quick recap…
- Be open to learning
- Know when to stay out of the markets
- Know that you can be wrong no matter how sure you are
- Manage your risk
- Trade with an edge
- Execute relentlessly
- Be humble
With that said, I wish you good luck and good trading. I’ll talk to you soon.