What separates the professional trader from the amateur? It is not that the professionals use better indicators, they don’t have a secret method to time entries or know how to call tops and bottoms perfectly. In fact, the difference between good traders and struggling traders usually comes down to a few, very specific points. The concept that can help improve the trading performance of amateur traders significantly is called “Ask yourself: What would the professional do now?”
Just think about all those trades you KNEW you shouldn’t be in, but you entered anyway. Or, how often did you do something with your trade and deep inside knew that it wasn’t the right thing to do? Most of the time, traders would be much closer to profitable trading if they could just stop making bad trading decisions and repeating mistakes.
Before doing anything, ask yourself…
…what would the professional do? The next time you want to break your trading rules and open a trade early, ask yourself if a trader who consistently makes money would do the same. Or, when you see price approaching your stop loss order, would the professional and winning trader really widen his stop loss and risk taking a much bigger loss instead of just accepting that his trade idea was wrong and it’s time to move on to the next trade?Traders who start operating in such a mindset question their trading behavior constantly and are able to differentiate between positive and negative trading behavior. It is obvious that a professional trader would often act completely different from you and by consciously questioning your trading decisions, you will be able to avoid many of the common mistakes.
Before making a trading decision,
pause and reflect. Ask yourself: What would the professional trader do
now? Should I really do what I am about to do? Will it help me become a
profitable trader?
The 6 deadly sins of amateur traders
It is not a secret why the majority of traders struggle. After you have acquired a good understanding of how trading mistakes manifest in your trading, you have a greater chance of avoiding them in the first place. The following points describe the 6 greatest error sources for traders:#1 – Breaking entry rules
It all starts here. Even when following precise entry criteria, traders often enter trades too early and don’t wait for confirmation. Or, they enter trades too late and chase price because they did not trust their method when the signal occurred.
#2 – Violating risk management principles
Taking positions that are way too big is a very common problem among traders. When your position is so big that a loss would have a significant impact on your overall account, you are more likely to make emotionally caused mistakes.
#3 – Bad in-trade decisions
Once in a trade, the problems don’t end. The most common trade management errors are trailing stop loss orders too close behind current price, watching your floating P&L constantly with every tick and randomly moving around your target and stop orders without following a clear plan.
#4 – Exiting without a plan
Trade exits are often neglected and traders don’t understand the importance that trade exits have on their performance. The most costly trade exit mistakes are closing winning trades too early and missing out on potential profits, closing a winner too late and giving back profits or letting a loss run beyond the original stop loss. Trade exits are an important cornerstone of profitable trading. Interfering with exits usually costs traders a lot of money.
#5 – Not learning from mistakes
Be honest to yourself and think about how often you repeat the same trading mistakes over and over again? But why is it that traders don’t learn from past mistakes? Most traders just close their trades and will never look at them ever again. Without a review process in place, improvement is almost impossible. If you are not aware what you did wrong and what caused your loss, how can you expect to become a better trader? Professional traders operate in a growth mindset and they are constantly looking to improve.
#6 – Changing systems
Imagine Paul Tudor Jones, Marty Schwartz or Jesse Livermore and think about their approach to trading. How likely is it that those top traders would jump from system to system week after week, try a new indicator every few days or buy trading robots or EAs that promise making money effortlessly? It is absurd to think that the professional got to where they are by jumping from one system to the other without ever really committing to one thing. Do you still think that you will stumble over the one system that will just work miraculously?
We suggest you write down the phrase “What would the professional do now?” and put it next to your trading desk. The next time you are about the make a trading decision that you think you shouldn’t be making, take a look at the phrase and re-evaluate your action.
How far has breaking the rules and repeating the same old mistakes brought you so far? If you are still not seeing the results in your trading you are after, it is time to take a different approach. No professional trader got to the top by breaking his rules, manipulating his orders or gambling with risk.
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