How to become a professional trader
The main public for this article is ME, I’m going to re assure the knowledge acquired over the years and will read this over and over again, and maybe you can get some value from this, let’s begin.
Are you ready to become a professional trader? What it takes to become a professional trader?
Ready to hear the one million answer? It requires 10.000 chart hours, deep patience and study, passion and desire to work hard, practice, practice and more practice, and forget the money for a while, this is a marathon not a get rich quick.
Disappointed? I hope not, here I will give you some keys to work hard and get to the next level.
Why I say forget the money when the main objective of trading is to make money? Because think in money makes you stupid, shift your focus on the content and not in the process of actual good trading, think in money boost the emotions of fear and greed, the big enemies of trading, if you want to become a professional trader first you must understand what trading is.
What is trading?
Trading is psychology, yours and theirs. We have all heard the clichés about fear and greed. They rule the markets. In fact, that’s all the markets are: a reflection of these emotions. In order to make money you must learn to control your fear and greed and identify the other people emotions and exploit them.
We give in to our fear when we don’t take the next trade because we’ve just been through a string of losers and fear losing again. We give in to our fear when we put our stop loss too close and get stopped out of a trade without giving the trade enough room to develop. We give in to our fear when we freeze as a trade starts to lose money, and we don’t take the exit signal because we’re afraid of losing money.
We give in to our greed when we take a profit early, before the regular signal, because we don’t want to give back any of the profits. We give in to our greed when we trade more lots than we normally would because we feel good about this trade.
So the first objective is to understand the markets and approach trading as a business. Easy access to the markets makes the business of trading an exciting diversion which seems like a game. The person who approaches the markets unprepared is entering a professional arena with an amateur chance of winning. Is like try to do surgery simply because you feel good and have read two medicine books.
Your ‘enemy’ in trading is well prepared, have excellent understand of the markets, high-end computers, more capital and good designed and tested systems.
But hey don’t worry, with a simple and realistic approach you can also become a professional trader. Wait a moment did you say simple? Yes, because simple is better, trading is the most easy task to complicate and the most complicate task to simplify. Read the last statement again. Trading is simple, never easy, but really simple, people spend years and lot of money until they realize this, markets are very expensive teachers, much more than me.
Understanding the Markets
It’s crucial to understand the markets, if we understand how they work, we can get a better understanding of ourselves, and in turn be better traders. Controlling emotions takes discipline, but let’s first understand what the markets are.
Markets exist for one purpose and one purpose only: they exist to facilitate trade. Facilitating trade means that the markets will do anything they can to get individuals to participate in the market. How they do this is through movement. Markets move up and down searching for buyers and sellers, markets must move for their survival.
It is crucial that we understand this.
Think about it, markets have to move! The knowledge that the market has to move gives you confidence that the string of losses can’t continue indefinitely, it eliminates the fear.
To keep traders interested, the markets have to move, if not, traders become disinterested, stop trading and leave so market will die.
Now I’m going to explain how the markets manifest in different modes. The market has three conditions: trending, consolidation, and reversal. I like to view the market like an auction of a Picasso painting. This is the mentality of an uptrend: imagine that you are at Sotheby’s auction of the painting, the bid start at 25, the people have money to invest and some number in their minds about how much to spend and how much the paint could be sell later and made a profit, so people smoothly start to bid up, 30, 35, 45, but suddenly one bidder scream 100, what is in his mind to jump from 45 to 100? He must be very confident and sure that the paint is undervalued and the real value is much much more than 100, he is impatience and he want the paint now (that’s the momentum in the chart, suddenly a 5 minutes candle rise 40 pips…), the rest of the audience at Sotheby’s auction will start to think, this guy is serious, want that paint so bad, why? Maybe he’s a paint merchant and know that the paint worth millions ! So the crowd starts to jump in 150, 250, 400, suddenly some guy bid 1.000… The crowd is silent thinking and analyzing if this is a fair price or not for them, if they perceive it cheap, they will keep bidding the price up, if the crowd perceive this price expensive, the auction will end (the top of the uptrend) 1.000 at one, 1.000 at two… SOLD, we have the end of the rising market….
This example is a way to SIMPLIFY the markets and how the function and the mechanics of the price movement and the psychology of the market participants. Is crucial that you understand this, re read this and play with the theme, because there can be variances in the process. Also remember that trends are psychology, and take a lot of effort and time to change a trend. Why? Because people are making money with the trend, and want to keep making money, remember that people’s beliefs do not change easily, unless they are extremely disappointed. People are disappointed when their expectations are not fulfilled. (So please, don’t fight the trend!)
In the next article I will describe how the DOWNTREND mentality is in another easy example, also will cover more psychology things that you must understand very clear to become a professional trader.
