This reading is made for traders that want to have some insight in thoughts of Forex traders with experience, and how do they trade on daily basis.
The author of this article has been in the business of the subject for quite some time, and during that span he has seen probably all things that a trader can encounter. Those things and events include hanging out with successful traders who work with big money, as well as holding seminars to educate novice traders. Therefore, this should be a first person experience, and an outline of how the professional trader thinks.
With experience, there are many habits that traders develop. If a trader has a lot of experience, we can assume that he has some success, because, if it wasn’t like that, he would be broke before being considered as an experienced one. An experienced trader can’t have bad habits, because, those obviously wouldn’t take him to be experienced (lasting for a long time). Therefore, (good) habits are a part of success.
Besides habits, what professional traders have with them is something that they do well. For example, they know what are the best currency pairs to trade. Simply, some traders do better with certain pairs. By dealing with a certain market for a longer time, you get to know how it behaves, and you know when are your chances better and when it’s better to stay low. Knowing your portion of the market is what takes to make a good trading strategy.
This might come as a surprise to some, but most professionals in trading don’t realy much on news about economic ongoings, or other things that indeed are related to the market. They rather consider the new being “priced into the market”, so they rely on something called “price action”, which is deciding about your traing from pure naked price charts.
What this means is that financial markets operate on “future time” and on the expectations that traders have about what the value of a particular trading instrument will be if XYZ happens. This is typically why when XYZ actually does happen, price tends to react opposite from what common sense would suggest; because there is now nothing to expect from the event.
Thinking about time
It has been noticed that majority of professional traders at Forex don’t spend their time without having done something useful. They rather take time to think about the market in a bigger picture.
Bigger picture provides a better view about the ongoings at the market. Short time frames are not useful for that, and thus they are aware that they lose the more important aspect of the market. A serious Forex trader won’t spend time just looking at charts without knowing what do they go for. To achieve a good result, a trader needs to se overall situation of the market, and low time frames can’t offer that.
To put it simple, serious traders use time wisely by analyzing charts of four-hour time frames, or higher, as low time frames don’t do much good unless to refine entries. According to a successful trader, the first move towards becoming pro is fully accepting higher time frame for your display in order to get more precise market overview.
Thinking about trading frequency
Thinking about the market in the bigger picture enables professional traders more accurate and efficient trading. A barricade that stands in the way of many traders is the thought that high frequency of trading will reward them with more money.
However, thinking about trading frequency led to the knowledge of the fact that trading less frequently rewards traders with more money than frequent trading does for such traders. The reason that there are still traders that ignore this statistical show that less frequently is better in wider scale is that it might not be better short term. However, those who manage to get money with high frequency of trading are the lucky ones. There are not so many of those.
Most of the professionals trade usually less frequently and in higher time frames.
Thinking about precision trading
Precision trading is, let’s say, available only to those with some real time-experience. The reason is that only those who know what they are waiting for can trade “precision trading”. They patiently wait for their thing to appear, and then they react. Most of the traders don’t know what those things are, because the receipt for “that thing” is for every trader individual thing. It only comes with experience.
As in everything humans do, the difference between an amateur and a professional is that the professional knows when to kick off, while the amateur is way too impatient and most of they don’t know what things are, and what different situations mean.
This being said, we can conclude that a trader wants to be the one in a position to go for “precision trading”. It is the ability to recognize a setup of a trade that brings best of your way of trading; the percentage of money invested, the amount, the time and other aspects. Compare this to buying essentials. Give $100 to a parent to go shopping for things the family need, and give a teenager $200 with the same task. A teenager will probably buy important things for that money, but an experienced parent will certainly do a better job.
Thinking about to ways to harnes the power of the market
Forex market is a fast changing market place, and weekly things become different. Professionals think about this fact and try to turn it their way, and take advantage of it. Professionals try to find a way to find profit from it. These experienced traders consider that taking a good position when there’s a “perfect storm”, and then hold that position for several days or weeks, is better than entering small positions every morning, and getting out every day.
However, it is possible that there are traders who take “multi-hour” positions, which is a day to day entering and exiting, but that depends on your trading plang. It isn’t about knowning your market edge.
Professional traders on forex work in a way as they understand the dynamics of the price and the basic mechanics of the market. Those professionals consider the major element of any possible setup, which means that they look at the analysis of trends and they pay attention to meaningful market levels. Then they mix that with “edge”. For example, they use trading strategies based upon price actions.
However, in order to understand how these things work, you have to have a personal view on the subject and a personal experience with the strategies based upon price action and of course, knowing the mechanics of the market.