Getting out of the retail mindset.

I want to preface that my post, 3 differences between a professional trader and a home gamer, is nothing against retail traders, first I am never going to intentionally insult a client and secondly any trader is subject to shifting into either mindset.  There are distinct differences between the professional mindset and a retail mindset.

Confidence

Every person wants more confidence and traders are no different.  The difference is  the volatility of the confidence.  The professional mindset understands that there are good days and bad days.  When things are working really well they do really well.  Their confidence does not put them in a profit box.  We are traders for the unlimited upside and while on the confidence roller coaster it is easy to lose sight of that.  They can press it because one losing trading does not wipe out how they did that day, financially or psychology.

Adapt to changes

Trading is about adapting.  It is adapting to both internal changes and market changes.  Professionals are aware of where they are and make the proper adjustments.  They know how to change because they have made the wrong changes.  They learned what works best because they spent time thinking about the good and the bad adjustments and the speed at which they adjusted.  Once you have a grasp on the internal change it makes it much easier to adapt to market changes.  Many traders work on the market changes and completely ignore the internal changes. Eventually they realize the internal part but then they are forced to relearn the market part.  This is no easy task but it is necessary to maximize ability.

Trading Process

People try to find efficiencies in the chart instead of the process.  Imagine you are running a business. Lets say you do not make any money from a phone call or at least it is the least of your worries.  What if every time you had to make a phone call you had to go to the bank to get quarters, then go to the corner to a pay phone, talk to an operator, and eventually make that call.  That whole process has wasted significant time which steals time from reaching the next milestone. Traders can gain efficiency through not having to think about a task like making a phone call. Yes in the beginning it is much harder and more expensive for a landline but if you are doing it several times a day you are recovering those outlays immediately.   This also helps with internal and market awareness.

No need for certainty

In the beginning you need to have some faith, there is no way you will be able to take the necessary painful steps to see this through.  Trading is hard, parts of it are easier and there are great rewards.  It is difficult and that is what makes the rewards so great. They know they are promised the opportunity to make money, not that they will make money. Every trader has to capitulate to this idea.  The sooner you do, the sooner you start maximizing your abilities.  It is a catch 22, similar to you needing experience for a job but the only way to gain experience for that job is to have a job.  They  have a well thought and tweaked plan and they stick to it until something changes.

Risk

They understand risk is equal to opportunity.  They have a firm understanding of risk and more importantly they know what it means to them.  When the lose they understand that they gave away their money (a mistake), that they are loaning the money (they will get the money back one day plus interest), or they spent it on education (to learn something they did not know before).  They NEVER risk more than what they are comfortable with or their trading account money.  They know how much they are risking at all times.  They know there is several ways to risk their per trade limit. They always are able to trade tomorrow, when ever tomorrow is.

They assign proper credit

There are times when the market does all of the work, or the system does all of the work, or the trader does all of the work.  Any trader’s best day is not about a dollar amount, it is about how well they did compared to what they were suppose to do within their trading plan. If I only lose half of my downside limit when I should have been at my downside limit or a make a little more than I should have, that allows me to have more bullets and information for the next time.  Those extra bullets and information allow the big days to happen.  When the market or system does the work they save that money for the times when the market or system doesn’t work. If you are not completely aware of why you are losing and making money you can’t adjust to the feedback that tells you how to take that next trade or weeks of trades.  If you can perform at least as well as your trading plan you will be in a good place.

Recovery mode

What is the difference between the best golfers in the world and the weekend hack?  The weekend hack isn’t always in recovery mode.  They aren’t hitting every shot from behind 3 trees in front of a water hazard.  The best golfer can make those shots if necessary but it is more important they aren’t in that position.  They can feel their swing go and make the adjustments, maybe even in mid swing but at least the next shots.  Some times they fall out of their groove and make adjustments to how often they play. Talking with some traders it is evident they have never even traded outside of recovery mode, they have no idea what it feels like any other way.  They didn’t take the necessary steps and fully accept responsibility for not taking those steps.

They know what they do not know and are content

Things are always changing and there is no way to always have perfect information.  They are relentlessly searching for the information that is the most relevant information for themselves.  They execute on that information and look for that information to change.  The retail mindset is to gather information to create certainty.  You will never have that much time or money and it is not efficient use of resources. Professionals do not apply ridged information to a flexible market.

Once again I am not trying to insult any trader or create a class of traders.  Early in my career, I asked one of my mentors for the best advice he could give me.  His advice was do not become a trader.  It took me a year to understand what he was saying.  It was his way of saying that trading is hard.  That trading is about adapting and you have to adapt with it.  Adapting requires changing your mindset and ideas about yourself and trading.  It is about recreating yourself on a daily basis from the foundation of work that you have already put in.  It is about being comfortable, at times, with doing work and not getting paid.  There are not any signing bonuses in trading, you may get the money but the point is to keep it. Being a futures trader right now is one of the best times ever. For the retail trader; equipment, software and access has never been more cost effective.  I look forward to competing with you.

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  • ShortBusTrader

    There are so many spelling mistakes and bad grammar it is hard to read this. The message is great, but I really wish you had proof read your words a little.

    “They know that they are promised the opportunity to make money not money.”  argghh.

    • Thanks for reading as always. If you can point out something specific would be happy to change it.  Other than taking out the “that” out I am uncertain what to change in that sentence. Thanks for your help. 

      • ShortBusTrader

        Um, are you serious?  That sentence makes no sense. You can take out the word “that” and it is still grammatically incorrect, and does not even have any meaning to me.  How one can put the words “money no money” together with no punctuation between them and have it make sense is strange to me. You should reword the entire sentence so that I can even get an idea of what you are trying to convey to the reader, because I really do not know. Perhaps you are trying to say that traders only have the opportunity to make money but are not guaranteed to make money ?

        Anyway. There are at least 5 or more other sentences just like it in the whole article. Here are three examples of bad wording and/or grammar and that is just from the first 1-2 paragraphs.

        “Every person whats more confidence and traders are no different.  ”
        “The difference is that the volatility of the confidence.”
        “They can press it because one losing trading does not wipe out how they did that day, financially or psychology”

4 Responses to Getting out of the retail mindset.

  1. […] On the differences between professional and retail traders.  (Trader Habits) […]

  2. ShortBusTrader says:

    There are so many spelling mistakes and bad grammar it is hard to read this. The message is great, but I really wish you had proof read your words a little.

    “They know that they are promised the opportunity to make money not money.”  argghh.

    • Eradke says:

      Thanks for reading as always. If you can point out something specific would be happy to change it.  Other than taking out the “that” out I am uncertain what to change in that sentence. Thanks for your help. 

      • ShortBusTrader says:

        Um, are you serious?  That sentence makes no sense. You can take out the word “that” and it is still grammatically incorrect, and does not even have any meaning to me.  How one can put the words “money no money” together with no punctuation between them and have it make sense is strange to me. You should reword the entire sentence so that I can even get an idea of what you are trying to convey to the reader, because I really do not know. Perhaps you are trying to say that traders only have the opportunity to make money but are not guaranteed to make money ?

        Anyway. There are at least 5 or more other sentences just like it in the whole article. Here are three examples of bad wording and/or grammar and that is just from the first 1-2 paragraphs.

        “Every person whats more confidence and traders are no different.  ”
        “The difference is that the volatility of the confidence.”
        “They can press it because one losing trading does not wipe out how they did that day, financially or psychology”

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