It is a fact that successful traders think and act very differently from unsuccessful traders.
In today’s lesson on the unknown and rarely discussed habits of successful traders, we are going to discuss some of the most important differences between winning and losing traders. We will look at how they think, how they act and what they do on a daily basis. This lesson aims to provide both beginner and advanced traders some much-needed insight into the mindset and activities of a professional trader, allowing you to start mimicking these habits and ultimately improving your trading results.
You’ve heard it before I’m sure, but I’m going to say it again because it’s so true: If you keep doing what you’ve always done you will keep getting what you’ve always got.
So, the question becomes, where are you now with your trading? Are you successful, or not? If you are not happy with your trading performance, then it’s time to do something different! Hopefully, the following unknown and rarely discussed habits of successful traders will enlighten you and get you on the path to profitable trading…
We Think Like Hedge Funds, Regardless of Our Account Size
Account size simply doesn’t matter for the most part. It doesn’t matter in the sense that if you can’t trade successfully on a $1,000 account you won’t trade successfully on a $10,000 or $100,000 account either. Account size means nothing if you cannot trade properly. So please
However, account size can indeed magnify your gains and a larger account can change your life faster than a small one because profits (or losses) are obviously greater the bigger positions you can trade. But, before you can trade a big account profitably you have to trade a small account profitably, and it really is better you start on a small account first anyways. The point is, successful traders are always thinking like a hedge fund, they are in the mindset all the time. Don’t become consumed with making money fast, instead, become consumed with trading properly and winning and you’ll make money far faster. Consistency is key!
We Exploit Herd Behavior
The ‘herd’ is a common term used in the trading world when we refer to the masses of beginning / amateur traders who tend to lose money. The goal of any trader is to move from one of the herd to one that typically does opposite of the herd or perhaps I should say a ‘shepherd’, one who leads the herd. The main point to understand is that the herd usually end up losing money, you don’t want to be part of the them. That’s why when we share trades you will see that we tend to take spikes because we take the opposite trade in liquidity zones as explained in the ebook.
- We are not afraid to buy new highs or sell new lows
Ironically, whilst great traders are contrarian thinkers (doing the opposite to the crowd), sometimes actually going with the herd and following huge moves in the market can be the contrarian thing to do, because everybody else is looking to bet against the move.
How often do markets trend much further than you think they will? Very often, a market will get into a strong trend and unsuccessful traders will continue to bet against that trend simply because they come up with all kinds of reasons why it ‘can’t keep going’.
- Take the other side of the herd
The obvious and most common contrarian trade is to take the other side of the crowded trade (market moving into a key level), we fade that move (fade, meaning sell into strength or buy into weakness). We know that most people get the market moves wrong, so we jump on the opposite side, either blindly at a key level with limit orders or with a price action signal to confirm an entry
We don’t scalp
Successful traders are rarely scalpers. There are many reasons why I ‘hate’ scalping, but the biggest one is simply that it’s much harder to make money consistently as a scalper than it is as a swing trader or position trader. That’s why we only share setups from h1to h4 and daily we don’t deal to much with m15 m5.
Most successful traders are what are known as swing , which basically means we hold positions for multiple days, riding swings in the market and trying to profit on them. This is in stark contrast to a day trader who ducks in and out of the market multiple times on a day, trying to take tiny gains from each trade and at the end he finish by paying a lot of fees!
We focus on the daily h4 h1 chart time frame.
A low-frequency trading approach is what you need to adopt if you want to become a successful trader. Remember what I said in the introduction? Well, what do most traders do? They trade a lot. Most traders lose money as you know, so you want to trade less frequently if you want to be profitable. Quality over quantity.
One often over-looked reason that many traders lose money due to trading a lot, is because they get eaten up by the spread. Constantly entering and exiting trades adds up to big transaction costs (called the Forex spread) and for most traders this just throws more dirt on the grave they are digging for themselves by over-trading (it’s a huge unseen trading cost over time).
One thing that separates successful traders from losing traders, is that successful traders do not trade a lot, in fact, we hardly trade at all. The ‘big boys’ trade like snipers, not machine gunners because we know that is how you preserve trading capital long enough to take advantage of big market moves.
Beginning traders often do not understand the fact that being flat (not in) the market is a position. Remember; no position is often the best position. You need to have discipline and patience to excel at trading and this is built through waiting and only taking high-quality setups and learning to ENJOY passing on low-quality trades or when there is no trading edge present.
We Hardly Trade at All
The great Warren Buffet teaches this exact same approach. If you’ve never heard of his “Punch-card” concept, here is what he says about it:
Notice that he says, “you’d be forced to load up on what you’d really thought about”. This is a very important part of our personal approach. we don’t take many trades at all, but when we do, we believe in them because they meet me pre-defined criteria or I’ve researched them and I’m confident in them, so I ‘load up’ and I go in big. Keep in mind, you cannot trade this way if you’re trading very often, but you also do not need to trade a lot; one big winner a month or every three months even, can make you enough profit if you know what you’re doing.
The more time you spend preparing one scenario the more likely to happen! that’s why AIRFOREXONE do not share scalping trades chasing 5 pips as other do . We try to be selective and look for confluences. By other side the market at least 60% is not showing any scenario.
We measure ourselves on R not money Returns
Successful traders focus on trading, not on the money. By doing this, we essentially make trading into a game or competition, and it’s us against the world. You have to play it right to win, and if you make a mistake, the consequences are very real. Thus, we measure ourselves based on R, not on pips or percentages. By R, I am talking about risk / reward where R = risk and success is measured in multiples of it. So, a 2R winner means we risked R and doubled our risk to make 2R. To learn more about this concept, check out this article: Measure profits in R, not pips or percentages.
Thank you so much for reading this post. If you want to bring your trading to the next level, STOP struggling with psychology or price action, make sure to click the following links.