What separates novice traders from expert traders?
There are some obligatory steps in the traderís development. The newbie traders start with no knowledge, no experience, but some expectations for particular amount of profits. They soon realize that their dream will not come true so easily and they will have to work hard firstly.
The first step in the traderís development is when he gain some knowledge, but still has poor results. Next stage is when the trader start to make some money, but it is difficult and the balance is not a smooth curve. The last stage is when the trader builds a good account, trade easy and make a lot of money.
We all want to move to the last stage immediately, but there are some signs we have a long way ahead before entering into this stage. Could you give some examples of such visible signs, which separates newbie from the expert traders?
Great discussions and great stuff here!
Here is the most important sign that distinguish novice from experts. Beginners do not understand the idea behind the risk management at all. They often risk too much capital in a single trade, which affect their emotions and their trading decisions. Beginners are searching for one big shaking trade to give them all the profits and then go away; more experienced traders use tested systems and risk at maximum 1% of the capital per one trade.
Post Thanks / Like - 1 Thanks
Interesting topic! I also found that there are a lot of bad signs that beginners show in their trading and even in their behaviour generally. They believe there is some Holy Grail in trading, a method that works in every one situation and they just have to find it. Beginners believe that the successful traders always win, no matter the market conditions are. They donít understand the nature of the trading and that the fluctuations in the results are something normal and irremovable
Exactly. In trading world, learning process is very slow. Newbies usually want to learn it as if it some kind of school assignment which can be solved in a few days. Only experience makes u an expert trader.
Originally Posted by Kolyo
Very typical Beginners most often search for tips and signals to trade them and don’t focus their attention on the market. I have also observed that a lot of newbie traders after several books think they know everything and start to give advices to all around; they don’t realize that trading decisions are based often on personal methods and couldn’t help a lot for somebody else trading.
Originally Posted by runneroption
That's it! And a lot more.. Beginners confuse trending markets for their skill. Beginners confuse luck with their skill. Beginners search for advices; more experienced traders search for robust trading systems and test them. Beginners change their methods very often after every losing streak; more experienced traders know exactly who they are and what kind of methods they trade. But you could not gain experience if you haven’t passed trough all these stages
Exactly! Nothing like experience. There are plenty of 'how to be successful at trading' articles on the web for you to peruse, but nothing beats actually doing the trading and the longer you do this, the better you become. As is the case with anything life. Still, I recommend traders to not wait until they have read everything before getting down to trade. It is a far wiser strategy to start trading immediately and learn as you go.
Originally Posted by M.J
What kind of traders? Each asset class requires different skills...
I've never been good as a forex trader. I simply can't be (one of the reasons for spending years playing with the Strategy Tester). But all changed when I moved to binaries. I had education, but no experience. As a binary trader, I immediately saw the opportunity embedded in the price at the time. I said, hell, I risk 13 euros to make 87. One win covers 6 losses. Just have to wait like 2 minutes, and if nothing goes bad, I can keep the money. And I've done it! What made me different from a noob?
I think it was the money management embedded in the quotes. Low spreads allowed a very good money management, combined with an overall bad pricing that disadvantaged the broker - because I wasn't fearless for nothing, I saw that despite the pricing, the chance of winning was still good overall. Chance favors a prepared mind. But was I prepared? Did my option education had any meaning ? Or what I used was just common sense ? So I've done it from the beginning, without previous experience. Oh, and I've studied BetOnMarkets for years, but I've never traded with them. When I was almost ready to trade, they upgraded their interface and removed my favorite bet (Double Contra). But with GFT I played the demo for a week and then I've decided to hop in. I didn't trade well on the demo, edge-wise. But I quadrupled the money, so I said I was ready to go. The first hours of live trading, I lost 50% of my equity. And then it just hit me and I switched my style. Ended the day @more than 33% profit. And I still do what I did then, just that I don't accept the same prices, and I trade seldom.
My learning process was unbelievably fast. Equity option traders see their options expiring 12 times a year. You guys see the options expiring one time a day or about 12 times a day. I see my options expiring about 156 times a day (but I trade only the european session usually, which means about 78 times a day). By the end of the year, I reached more than 1800 option legs traded, most of them traded before my violent edge changes in december.
I think the best sign of the last stage is when you are simply lose the desire to do trades that just look good, at the same time knowing they are not good. I had that a lot of times in the past. I was pushing the button, feeling that I will lose, in the hope of luck. When your trading is a hoping game, you're doomed. I understand what I say here is hard for you to chew on, because you always trade at fixed yields and option value is not present in your trading. You just try to nail the market itself. But, if you'd have a system made of a few types of signals, then the edge is when you stop doing the trades that are bad. If one can wait for good signals to trade well and recover losses, why not trade only these, even if they are rare? The sign is not having the compulsive desire to trade the conditions that are not proper. Then, trading in proper conditions just naturally makes money, and switching from an equity rollercoaster to a slow, but steady equity growth will also have psychological effects: a more serene attitude that will naturally stop you from making big mistakes, because your mind will refuse needless stress. Small mistakes would still come along, but nothing impossible to overturn.
P.S. Kolyo, try solving the problems with the forum. I too have problems posting on some threads (tried yesterday a few times on the Strangle and I couldn't). Also, post display is tricky. New posts appear very late, and sometimes last post author is not the one displayed in the topic index.
Hi, fxeconomist. We are working hard to resolve that issue, but in the meanwhile you could save you a lot of effort if you refresh every time you visit new page or before posting new comment. If you have any other questions or problems with the forum feel free to write me. You are valuable participant of the discussions!
Originally Posted by fxeconomist
Following differentiates a novice trader from an expert one...
2- Emotional control (fear and greed)
3- Ability to have patience while trading
4- In-depth analysis - both technical and fundamental
5- Serious Attitude towards trading