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This was a question that was asked to me on Quora ” What separates amateur traders from the pros and how did you know you finally got it?“. Below is the full question and answer. Also feel free to follow me on Quora here
Question: What separates amateur traders from the pros? How did you know you finally got it?
Answer: Of course the easy answer is profit and loss. Pros make bank while amateurs tank but the true answer and what really separates a pro from a joe is their ability to remain psychologically stable, tune out BS and approach trading as a job and not a glorified gamblers get rich quick scheme. Let me explain a bit further.
Psychology is,was and always will be the single greatest factor in your success as a trader. There is a very fine line between winning and losing and the traders with the strongest psychology will succeed. It doesn’t take very long to “learn” how to trade, as a matter of fact learning to trade is quite easy, its the winning part that is hard. Amateur traders often posses the knowledge and intuition to succeed in trading but allow their emotions to consume them. Amateurs will often panic in trades, allow outside influences to derail their decisions and self sabotage their trading process. This is a vicious cycle and the single biggest reason for trading failures.
Amateurs also have a tendency to justify every outcome of the markets like ” Why is this stock going up/down so much” or ” How come nobody likes XYZ they are the greatest company of all time they should be trading at $400 not $50″ etc. If there is one thing I learned is the market does not care what you think. We as traders are just guest in its circus. What I am saying here is an amateur will often force their believes and biases on the market expecting everyone to agree in unison and when this does not work sometimes they allow their strong beliefs and ego to cloud their judgment rather than facing the fact that the position is a loser. A professional trader does the exact opposite , a professional allows the market to do what it wants and trades accordingly. Also, a professional trader knows exactly the point at which they are wrong but rather than allowing their belief or ego get in the way they cut the position and move on.
The above examples all lead to one emotion and that is hope. As they say in the trading business “hopers are dopers” Anytime you get in a situation where the only successful outcome is hope you are screwed. A professional trader doesnt operate on hope just reality. A true pro doesn’t stay up at night hoping the market goes up or the market goes down or hope that a certain position becomes a winner or a loser. To a professional it is clear cut as it did or didnt- no in between. Understand that as traders we do want a certain scenario to play and we do “root” for our positions but we understand that it is just a trade and that when we get to the hope stage we have lost all control of the outcome and that is when bad things happen. This is why amateurs can often go on long win streaks only to have one bad trade wipe out all of their wins. That one huge loss was a product of hoping and the hope of it turning around for you kept you holding on to the losing position when you knew the odds were stacked against you.
As for the moment when you got it, I cant say for me there was that ah ha moment. I think this is because there are so many moments early on where you think you figured it out only to be humbled by the market. Trading is one of those things where you just keep plugging away at it and one day it sinks in that you are making a go of it and holding your own.
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