22 June 2022
While we often hear the term “professional trader”, what differentiates a professional trader from a trader? Is it the level of funding available? Strategy, targets and time spent trading? Is professional trading a career?
There is no doubt that the mindset of a professional trader is different from that of a part-time trader. They will continually monitor markets, spend hours looking at swing investment opportunities and be up-to-date on the latest news, views and forecasts. However, there are other factors to take intoconsideration as well.
A professional trader does not feel the need to be fully invested in the market all the time. Many of us who have invested in the past will often sell to buy something else, ensuring we always have skin in the game. While it is safe to say there are countless investment opportunities, it is important not to feel the need to be fully invested all of the time.
While some day traders/short-term traders can make a significant return, it can sometimes be challenging. A professional trader will pick and choose their moments, hold cash if required and wait until the "market comes to them". Try it; this is an essential skill!
Nathan Rothschild’s infamous saying has attracted more than its fair share of criticism over the years:-
"The time to buy is when there's blood in the streets."
This saying relates to a contrarian approach to investment, suggesting that it is time to buy when everybody else is selling. There is a skill in having the confidence in your research, gut feeling and opinion to trade when others are afraid. Human nature is often at fault for overbought and oversold trading positions, the herd mentality in all its glory. While Nathan Rothschild’s saying may seem a little grim, he certainly did well out of it!
You will often hear professional traders comparing their trading strategies to that of a crocodile, a killing machine which uses finely tuned precision to pick its targets. Often mistaken as sleeping, crocodiles wait in the shadows, ready to pounce, like a trader monitoring overbought and oversold stock positions. They just know that moment to pounce when the risk-reward ratio turns in their favour, and there is potential for a short-term swing trade - the kill!
Professional traders can sell out as quickly as they have bought in, bank a profit and return to the sidelines. This strategy goes hand-in-hand with those who are content to sit on the sidelines, not always drawn to open positions in the marketplace.
Many investors will build their strategies on historical events, previous price movements and trends. While this makes perfect sense, you must adjust this strategy during more volatile markets.
For example, no two patterns are the same whether you experience volatility on the upside or the downside. Professional traders who understand extended volatility will appreciate that the overbought/oversold situations can go way beyond the norm. Therefore, they would be just as confident buying towards the top end of a “normal” upward trend, as they would selling towards the bottom end of a “normal” downtrend. Understanding the market, changing parameters, and different volatility profile is invaluable.
While arrogance is often associated with professional traders and a humble attitude with part-time traders, this is not necessarily the case. Experienced traders may show an enhanced degree of self-belief, but they never stop learning. They are survivors and able to adapt to new market trends, different sectors and geopolitical issues.
Many part-time traders come and go, struggling to do their research and understand markets. Some would describe this as arrogance, the belief that they have made it; they are on the road to riches and understand the market better than anyone else. Of course, self-belief is vital as a trader, but arrogance has been the downfall of many.
Taking advantage of fast-moving markets requires a reliable dealing system using low latency technology. Global Investment Strategy UK is constantly investing in cutting-edge technology, creating efficiencies that allow us to maintain a competitive charging structure. This competitive edge has been the key to our growth in recent years.
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