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What is the difference between the professional traders and all the rest?


What is the difference between the professional traders and all the rest?

What really works folks? 

I think the real question is what really works now? 


1. The difference bewteen the professional traders and all the others

The difference between the professional traders and all the rest is that the professional traders are trading systems that are working now. There is not a compromise, either you are trading actually a winning system or not.  

My mentor told me once that what I need is to make a system that is working now. When the system works now I will put a capital on it, when the equity lines develops I would use the money earned by the system as an insurance. 

Do not get fooled the barrier between the professional traders and all the rest is very high.

So for the professional trader its main concern is how to manage the risk from already profitable system. That is because every system fails sooner or later, every system has its systemic risk. 

For the Euro Swissy system we had even a life example for that. The question was when and how to protect the capital generated by the already succesful system. The system had generated 100 % gain on couple of days and the system had a drow down. We wanted to analyse why that happened and at what level to stop the system. How to manage the system risks

I really appreciate the book Fooled by randomness by Nassim Taleb. However by randomness he does not mean purely stochastic processes (as the markets are obviously not a purely stochastic process). By randomness he means our inability to have full information on the system at cause.

Imagine the example. 

A pregnant woman. For you it is 50/ 50 boy or a girl. For its physicial ot is 80% sure that is a boy because he did a echograph scan after 13 weeks. However if you do an ultrasound scan you can know the gender 46 % of the cases at 12 weeks.

This system is fully deterministic but for you as you do not know it is random.

There are systemic risks you just cannot avoid.

I really like the example with the turkey from the book The Black Swan. The problem with the Big institutional traders is mainly how they manage their risks resulting from their profitable systems. And do they create systemic risk for all the society.


2. The 99 % majority

All the rest 99 % (not even 95 % LOL) are (we are :) )  not knowing what they are actually trading, how their system perform in the past. A typical approach is to read a book and to trade according to the book.

Let say it straight. 99 % do not even have a trading system (by system I understand trading procedures as a whole) that is working now.

The 99 % majority do not have even a system that is working now.

99 % have no idea what a risk management is. There are number of ways to be a looser. It is easy it is natural. LOL. At least it comes easy to me. 

And to loose accordingly.

And that is completely counter - intuitive. When I first started several years ago, I had an idea that this is like any other work, I would spend hours reading the basics I will train, and I will get from it a steady income.

Nope. It does not work like this. I did not know that most of the books written on the subject are not helping a lot. They give the ABC of the game but they just make you a part of the crowd. 

Most of the writings on technical analysis are written actually by people who actually do not trade but are paid for writing articles.

However as Curtis Faith says in the video in this section is that now it is easier to learn how to do it but it is much difficult than ever to do it when you know how to do it.

Just the markets now are not what they were before. Look at the Euro. Now it is a completely different market than it was 3 years ago. A completely different market, period. And the indexes, they are a completely different market now. Actually is is really hard to achieve a diversification. 

Before the game was how to achieve more alpha now the question is if still the buy and hold strategy can actually work?








  • francisfinley 3234 days ago

    pro traders don't trade their own money full stop.

  • JohnLast 3234 days ago

    You know that this is just a way to make a classification. Just an opinion.

  • francisfinley 3233 days ago

    well when you are sat behind them watching what they do they look at percentages and numbers, most do not look at charts. If they do its bloomberg terminals with feck all indies.....

  • Jack1 3232 days ago

    There are many types of professional traders. Private Pro traders, Institution pro traders, self-learnt pro traders, graduated from Uni then specially trained pro traders. 

    Some do manual trade, some do computer trade, some just use a blackbox to do trade told by a senior stuff, "sit there, watch screen, if buy signal come out, buy 100 lots, follow screen to setup stoploss, target, trailing stop, or news coming, just stop out or put hedge on.

    some pro traders are very expert(just few seniors, not many). Most of prof traders are not expert, just follow senior's instructions to do a job.  They all got huge experience, history when they worked around senior experts, they are watching an learning a lot.

    They are under less pressure due to any wrong is senior stuffs fault. They are not in charge. This is key different for 98% of pro trader. 2% senior traders are different case. They are the master of fx business. They are often win, but, if they got loss, then, often, huge loss, they are ready to retired or very tired to fx trade, want to change a bit of life.



  • JohnLast 3232 days ago

    And there is some other thing if you ger a return on capital say 20 % a year you are a very good trader. Now imagine you have a 10 000 USD accound and you make say 2000 a year. That makes 166 a month and that is not a sufficient money for a living in the civilized world.

    So basically pro traders are trading with little leverage and with huge capital.



  • JohnLast 3228 days ago

    It is not even 20 %. Please take a look at the BarclayHedge. You can see the performance of large Hedge funds anddiscretionary traders. Have a look! 

  • JohnLast 3173 days ago

     'If 15% of day traders are profitable,' says Drew Niv, chief executive of FXCM, 'I'd be surprised.' "[16]