Difference in how novices and professional think
1. Professional is disciplined in following rules.
Novices need to be right.
They let looses run and cut profits short.
2.Professionals think in terms of probability. They will not be bothered by recent trades and test their system over a large number of trades across all market conditions (trending vs ranging; quiet vs volatile).
Novices are bothered by recent trades. They test their system by selective perception to fit in what they believe in.
3. Professionals think differently from the rest and get in and get out faster than the majority.
Novices seek safety in others. They buy at the top and sell at the bottom.
4. Professional think simple. They concentrate on crowd psychology and concentrate on overcoming their bias. They do not predict the future, is not affected by the past behaviour. They concentrate on the present, concentrating on what the market is telling them with a simple trading plan (order flow, demand and supply, origin of price movement) with risk management and exits (keep losses short and let profits run) and discipline to follow the plan.
Novices focus on indicators and seek sophistication.
5. Professionals do not care about news and economic indictaors
Novices seek to understand news and economic indicators.
6. Professionals focus on how the market really works, why prices move and the origin of price movement. (order flow, demand and supply, origin of price movement); who is on the other side of your trade; and have an edge.
Novices seek pattern recognition according to selective perception. Seek sophistication.
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7. Greed and Hope
ReplyDeleteNovices are greedy. They wanted more profits. In the end, they turn winning trades into losers. They also hope to turn losing trades into winners. In the end, they hold on to losers for too long.
They boose their ego by trying to be right.
Professionals are interested in the long term distribution of their winners and losers. They do not care about the the outcome of any particular trade. (probability of profit).
They are interested in achieving the predetermined reward to risk ratio of 3 to 1. .
They boost their account by trading right.
8. Misplaced Optimism
Novices want every trade to work out.
Professionals are interested in the long run distribution of wins to losses (probability of profits). (BSPTR)(order flow, DD and SS, orgin of price movement, who is on the other eide of my trade, have an edge)
Professionals are interested to achieve reward to risk ratio of 3 to 1. (Cut losses short, let profits run, position sizing)
Professionals are interested in crowd psychology and overcoming trading bias. (Think in terms of probability, do not predict, stay disciplined in their rules)
9. Obsessed with Prediction
Novices love to predict the future and look at the past behaviour.
Professional stay in the present. They think in terms of probability and do not predict.They stay disciplined in following the rules.
10. Control
Novices try to control with sophiscated systems, indicators, analysis and stay glued to the trading screen.
Professionals concentrate on
1.Their edge
BSPTR, order flow, dd and ss, origin of price movement, who is on the other side of my trade, my edge.
2. Risk control
Stop Loss, profit target (3 to 1), position sizing ($100)
3. Discipline
Think in terms of probabilty (not affected by recent trades, test the system across all market conditions over a large number of trades and do not predict the future)
Focus on crowd psychology and managing my own psychology.
Disciplined in following all my rules.