Retail v Professional

Why do 90-95% of traders fail?

- Retail traders learn to trade with the wrong tools from the very beginning. The indicators they use do not predict price like they think, but are just an alternative representation of price expressed mathematically on the same chart. Retail traders all use the same tools and indicators as other traders who fail ....so they all fail together, just at different speeds.

- Retail traders follow the same forums and create variations and alternatives of the same strategies. However the reality is that all these “great“ strategies have a 90-95% failure rate according to broker´s data.

-Retail traders have generic approach to trading in general. They think for it to be a good strategy it must "work" across all currency pairs. But actually all pairs behave differently so all the details and nuances are missing compared to if they were to just focus solely one or two currency pairs.

-Traders who fail think they have a strategy, but actually it is nowhere near tight enough. Many decisions are just made up in the moment and are not tested decisions. And the few who do have some sort of strategy, most are actually incapable of taking multiple trades in a row following the exact rules of their strategy. The simply can´t follow their plan because their emotional brain overrides every single trade. So they blame the strategy, and go searching for another.

-Retail traders often go for a set and forget approach, usually in the form of pending orders and 2:1 targets. Everything is pre-loaded into the trade beforehand, because they don´t know how to read the markets in real time and don´t trust themselves to follow their plan. Rather than look at the strength of the reaction they just close their eyes and rely on luck. The problem is they get confused when price nearly made it their target and reverses all the way to their stop loss. So next time in a trade they decide to override their trade plan... but then in this trade they are told they have poor psychology. In general this way of poor trading and self-blame, leads to a vicious circle of decline and frustration.

- Retail traders trade in a very precise way. They like to use tight stop losses and talk in terms of exact levels, rather than wide zones. They are taught to maximise risk to reward, so go for at least a one to two risk reward. All this sounds great, but it is not how the Forex markets work in reality. The end result is retail traders normally get stopped out many times in a row or miss the move.

-Retail traders try to do too much. They trade many currency pairs, many set ups and timeframes such that they will never grasp a deep understanding of any one market, nor be able to control risk well.

- Retail traders speculate. Retail traders project what they think will happen onto the market. They say if price comes back to a support area, or moving average.. price will go up. Retail traders frame trading the wrong way because they focus heavily on predicting price in advance and try to predict the future. In general they place too high an emphasis on price prediction and need to have a more "softer" reactive approach to trading, letting the market tell them where it is going to go.

- Retails traders like to have a fixed higher timeframe directional bias. They sometimes take multiple stop losses to find out their higher timeframe directional bias was wrong all along.

- Because they don’t understand why their trades fail, retail traders add more and more rules and indicators such that they cannot even follow their own strategy because it no longer makes sense, even to them. They make their trading so complex, always looking at different strategies, timeframes and information.

-Retail traders have an unrealistic expectations of what profitable trading actually looks like, because they obtained theirs from internet forums and YouTube. They think that all professional traders drive Ferraris, are making new equity account highs, and trade one hour each day from their mobile phone or a laptop at the beach.

- The hardest part is that some failing traders do have an awareness and they know deep inside there is something wrong with their trading, even after a profitable trade, but don´t know how to fix it. They don't know where to turn and study more and more strategies and trading approaches not realizing they are going in circles and will never be successful this way. Its not their fault, its just the realities of learning to trade.

Why do professional traders succeed?

-Professional traders trade specific market behaviour. Professional trades will examine hundreds of examples of what happens when price hit a certain area or level (in the past) and use this data to trade (the future). So they are not really predicting the future, more just trading the odds of price behaviour. Professionals do not try to predict what the market is going to do, but rely on their journal of scenarios to tell them what to do. Every decision is dictated to them by prior scenarios and data collection around a specific set up of how price moves on that pair.

-Professional traders have a high emphasis on reactive trading, rather than predictive trading. Decisions are not based on what they think the market WILL do. Decisions are based on what the price IS telling them.. waiting for the price to tell them whether to buy or sell, not vice versa. Professional traders do mark key levels on their charts but its a more flexible approach with no pre-assumptions made in advance. They wait until price gets back there before making decisions about the strength of the level. They can look at how price is interacting at the level, perhaps on a lower timeframe to make decisions. The translates into the market as normally getting later into the price move but in a more reliable way.

-They focus on how to get into trades that have a good risk structure and look at the usefulness of market structure as a good way of controlling risk. If price goes my way I will get out here... If price goes against me I get out here. Professionals also are more responsive when in a trade, and are constantly re-evaluating the odds of success. They will get out of trades if there is a weak reaction and price is unlikely to go much further.

- They keep things very simple, repeatable and control risk. They focus on consistency, simplicity and repeatability. They focus on the process and following their strategy rather than being concerned with the outcome of a particular trade, or a particular days performance. They do not to see bad days as failures, even in the moment but they follow their strategy because they know losses are just part of the game and they will win overall. Each trading day the focus is on trade execution according to their strategy.

- Professional traders normally trade with wider stop losses (or some with no stop losses) so they are more tolerant to the market and its costs them less commissions. They normally end up catching the move and have a higher strike rate, rather than trading so precisely and getting stopped out the whole time.

- Professional traders have a strategy that works and they go all on it with complete tunnel vision. A successful trader is a restricted trader. They don´t mess around looking at other strategies, or compete with other traders as to whose is the best strategy. They understand that the key is consistency and journaling processes to refine all aspects of their approach for constant improvement, not jumping onto someone else´s strategy. If there is a new scenario not seen before within their specific strategy, the trade is not taken but rather recorded and analysed for the future. Many professional traders do not read anything to do with trading or look at other peoples courses. They understand that trading is about putting in the hard work within one approach, to understand it at a deep level. They simply focus on their own approach and psychology in order to systematically to stay with their own strategy.

But its really boring to do that!!