The Difference Beteween Amateur and Professional Traders

The recent webinar we held with Pete Hiam, Sachin Vaze and Sam Elhelou was amazingly popular. I would encourage anyone who has not yet watched it, to do so, and to keep track of the common denominators between the three traders. In this brief blog post I will attempt to highlight one key fact: what sets these three traders (which we can consider “professionals”) apart from breakeven or struggling traders (which we can consider “amateurs”) is how they approach their work.

The Characteristics of FXRenew Traders

Many people are drawn to trading, just like many people attempt to become famour actors. However, very few succeed for any length of time and even less succeed on a long-term basis. The big question is: why?

Our recent webinar might shed some light on this. Pete, Sachin and Sam are very different traders from very different backgrounds and extremely different experience levels  (Sachin has 25+ years experience within investment banks, practically always in active trading roles, whereas Sam has zero experience within the sector and trades aroun a day job). They all work the markets in different ways. And yet they have all reached a level of consistency that is starkly different from chance.

This tells us a few things:

  • it does not depend on the trading strategy;
  • it does not depend on the experience level; 
  • it does not depend on the style.

Looking at what these 3 traders have in common, another picture emerges: they all have  what psychologist Ellen Winner defines as “a rage to master”. Elite performers in any profession all find ways of expressing inborn talents and traits through their work. This results in a “desire to study and perfect” through deep and sustained practice.

The trio spend significant time generating trade ideas, researching markets, and staying on top of developments world wide. There is much more time spent in preparation compared to the time spent actively trading and this is something that Ari Kiev and Brett Steenbarger also noted. Basically professional traders are always working on themselves, always refining what they do.They work on their personal mastery as a means to enhance their performance.

Finally, Pete, Sachin & Sam are able to “think in bets“. In day to day life, we fall prey to what Brett Steenbarger calls “resulting”: the tendency to judge decisions by their outcomes. In trading we cannot do this easily because there are too many unknown unknowns. It is possible to have a winning trade doing the wrong thing and to have a losing trade doing the right thing. So just like champion poker players, professional traders need to make decisions based upon odds. Consistent traders are skilled at identifying situations in which there is a favorably skewed reward relative to risk and are not perturbed by losses.

Amateurs vs. Professionals

Now in a more general way, allow me to highlight some observations that come from my years helping traders as a Coach and Mentor:

  • Amateurs stop as soon as they achieve something. Professionals realize that the initial achievement is just the first step in the right direction. I recall one particular student who left mentoring after a few good trades…only to return months later with a larger dent in his account.
  • Amateurs have a goal. Professionals have a process. Sam & I may sound like a broken record, but the only way to become consistent and actually get somewhere in your trading is to focus on the process and not the money.
  • Amateurs take one concept and apply it everywhere. Professionals understand their circles of competence. I see this frequently in traders that are more concerned about setups than anything else. They want to learn a setup and then they apply it every day, everywhere, on anything that moves. Obviously this is a fast track to the poor house.
  • Amateurs see feedback as criticism and take it personally. Professionals actively seek thoughtful criticism in order to eliminate their weaknesses. This happened in one particular occasion with a trader that just couldn’t stand it when I pointed out his eagerness to trade and was not accurately discerning conditions.
  • Amateurs treat simulators/demos as a game. Professionals realize that what happens in practice happens in live trading conditions.
  • Amateurs keep secrets and reveal very little (even to their coach!). Professionals pass on wisdom and advice – perhaps not all of it, but enough to really help others. 
  • Amateurs focus on being right. Professionals focus on getting the best outcome possible and following the process. If there’s one thing that really inhibits progress in struggling traders, it’s that darn emotional need to be right. Professionals don’t seek to be right and they couldn’t care less about being right or wrong.
  • Amateurs focus on the short term. Professionals focus on the long term. We could talk about chart timeframes, average holding period of a trade, or broader objectives. The pattern remains the same.
  • Amateurs show up inconsistently. Professionals show up every day. I had one coaching student who started well, but after one week started sending over his work with delays and after the second week was nowhere to be seen. I attempted a series of follow-ups to no avail. Without commitment there can be no real progress.

Over to You

On a more philosophical note, it seems to me that amateurs believe that the markets should work the way they want them to – and this plants the seeds of anger and frustration when a level doesn’t hold, a trend stalls, a trade gets stopped out, etc. They have a very hard time seeing anything beyond their own point of view.

Professionals realize that they have to work with the markets as they find them, and are always looking for alternative points of view. I do believe that this is tied to the capacity of being honest with yourself and “confessing” your vulnerabilities. Bringing out hidden frustrations, real motivations, pain, and learning to simply accept your feelings and not judge them, is a big part of spiritual maturity and goes a long way towards discerning “what you think you see” and “the way things objectively are”.

These were just a few reflections that came to mind whilst reviewing the webinar recording, but surely there are many more lessons to be picked up. So please feel free to use the comments section below this blog post to keep the conversation rolling.

About the Author

Justin Paolini is a Forex trader & Coach. He is a member of the team at  www.fxrenew.com, a provider of Forex signals from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.

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