What Separates the Professional Trader from the Average Trader?

Professional traders trade to make money for a living. There are a lot of traders out there that strive to achieve that goal of making enough, or more than enough for a living. To be a professional trader, though, a person needs to think like one and practice like one, or their trading will only ever be on the level of hobby trading. The professional trader sees the market differently and thinks with a supplier verses a consumer mentality. They can do that because they know how to read the markets. They know how to filter out the noise and have proper expectations of market movement.

The average trader thinks when the market gets to a certain point, they’re going to buy, because they think that’s where the market will take off and go up. Or, they think, when the market gets to another point, they’re going to sell, because they think that’s where the market will dive and go down. If the orders are going to come together at these pinpointed resistance and support levels, or Fibonacci levels or whatever other master level out there, and if you and everyone else are trading from there, why not be the trader who supplies the other side of the contracts? Those areas, those levels, those typical entry points are where you and most traders think the market is going to bounce, that you can take a swing trade off of it. And, almost always you’re right. The market does get to those points, but how often are you right on where the market goes afterwards?

The professional trader anticipates, identifies and see’s that the market is going to go “there”, they enter now and take advantage of it. The professional trader reads the market and knows those levels. Where everyone else is waiting for the market to get to, in order to enter, the professional trader has already entered. They've set their take profit points at where those entry orders are, thereby being the supplier, filling waiting entry orders. The market moves in the direction to where the orders are waiting to be filled because that’s all that markets do, they exist and move to fill orders. In essence, to be a supplier of the other side of the contract, you need to think like the professional trader, and be one step ahead in your thought process.

To think like a professional trader, you need to read the markets like them. They use price action, expected movement and volume, the three essential components of trading. You need to see clean noise filtered price action. Many traders still use time based bars for the majority of their trading. There’s no reason to see another bar on your chart just because the earth rotated and time passed. Minute bars are choppy,making indicators go choppy and then your charts are messy. Using tick based bars, a bar will only print if price has moved, therefore keeping a chart clean. Seeing bars that print only when price moves makes it easier to catch the trends and reversal trends and read indicators, when you need to. The bars should be accurate tick based bars that show real movement and volume. Professional traders don’t rule minute bars out completely but use them for specific reasons and test them for such reasons.

1. Implied Volatility – especially used for distance, can be plotted onto charts as Deviation Levels. Implied volatility is seen in the prices of options. The price shows how much all the market participants are willing to pay for an option and they’re basing their pricing decision on how far they think the market is going to move, the ultimate market survey. That expected movement pricing is taken, factored into a deviation formula and then plotted onto charts as Deviation Levels, to see the expected movement. All information used to find these levels is based on the future, traders putting their money on what they see markets doing in the future. Nothing based on past performance.

2. Expected Volume – plotting what expected volume there should be onto charts and then comparing the actual volume coming in. If actual volume is more than what is expected, traders can expect more of a trending day and if volume comes in less than expected they may expect a flat or choppy day possibly.

The chart below has Apex Diagnostic Bars. In the second panel down, the yellow line indicates expected volume, when the purple bars surpass the yellow line then volume has exceeded expectations. In the third panel down, the black line indicates 75% of the expected movement for that hour, the yellow line indicates 100% of the expected movement, and the green and red bar combination indicates how far of the expected movement has been made for that hour. The bottom panel indicates the total deviation move for the day high to low. There are a few other things indicated as well on the chart but the major indications are explained.

Like any professional in any field, the professional trader practices their trade. They take the above components; clean, plotted price action, expected movement and volume, and thinking like a supplier, they back test and use their tools. The steps they take to trade their systems become muscle memory. Each chart they read becomes a familiar pattern they see and read again and again. They develop their skills enabling them to be the hunter and supplier, the hunter of orders, entries and stops, and the supplier to fill them.

For any of the above indicators or if you would like to learn more on how to use price action, implied volatility and volume like a professional trader, go to www.apexinvesting.com, a service provided by Darrell Martin. Apex Investing Institute Offers free education, and free access to the Nadex Binary and Spread Scanner Analyzers. Member traders are invited to trade in the rooms, take advantage of trade signal services, have key indicators and access the Apex Forum. Forum content is updated daily and includes over 7000 members. In a supportive learning community of seasoned as well as up and coming traders, traders of all levels learn how to trade Nadex binaries and spreads in depth, as well as futures, Forex, stock and options, and gain an edge for successful trading overall.