In this article we will discuss how Professional trader earn money from market and retail traders are fail to making money in share market.
You know that professional traders is responsible for up-down of share market, like when a stock price move up and when stock price fall behind this professional traders approach works.
Who is a professional trader? A professional trader is a person who works in finance and engaged in investing as a business or in a full-time role rather than occasionally or as a hobby. They may work for themselves, at a trading company, at a wealth management firm or as a freelance trader for individual clients.
Psychology Difference between Professional and Retail Trader
First we talk about a retail trader psychology….
A retail trader always want to double the money in quick way, he hates to wait patience. A retail trader buys stocks at any price without any strategy. He doesn’t know what is entry point, what is stoploss and what will the target of his trade. A retail trader placed necked order and lose his money in market.
While professional traders make money from market because they play with strategy in market.
Professional traders know when to buy a stock, what will be the target and what will be stoploss of trade. They wait for quality trade; they don’t trade in quantities they plays with quality trades, where retails traders takes daily trades. Retail traders have less capital and want to make double they are not satisfied with a 10% -20% return on his capital.
Example
A retail trader wants take a trade in stock , he will buy some quantity of stock at any price he doesn’t know when to buy where to buy. He buy stock than price fall against his buy price, than retail trader exit the trade in lose.
Professional traders buy stock at a certain price called as Demand Zone. Professional traders buy stocks in million -billion quantity. So if they change his stock buy price by 1% or 2% than their money value will change by 1% -2% and result will be the decrease in quantity. So they cannot change his buy price because million or billion quantity will decrease.
Where Professional traders buy-sell stocks
Professional traders move the market up and down. But where they buy sell stocks question is that. What is safe areas to buy stocks.
Professional traders are also called FII and DII. They buy stocks at only and only on demand zone, and sell at supply zone. We will discuss these in next posts.
They put the order at demand zone, these orders placed on stocks price for a big time like for some weeks, months, years also.
When the stock price come around these areas their order executed.
Professional traders never placed single necked order. They use bracket orders.
1.Bracket order contains
2.Entry price
3.Stoploss price
4.Target price.
Professional trader like to wait for a quality trade while retail trader hate to wait in market.
How a retail trader to be a successful trader in share market
So if you want to make a successful trader like professional trader than you should follow the professional traders rules in your trading journey.
Successful traders in the stock market often employ a combination of strategies, discipline, and mindset to earn money consistently. Here’s an approach commonly adopted by successful traders:
- Education and Research: Successful traders prioritize education and continuous learning about the stock market, economic indicators, and trading strategies. They stay informed about market trends, company fundamentals, and global events that may impact stock prices. Conducting thorough research and analysis forms the foundation of their decision-making process.
- Developing a Trading Plan: A well-defined trading plan is crucial for success in the stock market. Successful traders set clear goals, define their risk tolerance, and establish entry and exit criteria for trades. They develop strategies based on their risk-reward profile, time horizon, and market conditions, and they stick to their plan with discipline.
- Risk Management: Managing risk is paramount for successful traders. They never risk more than they can afford to lose on any single trade and employ risk management techniques such as stop-loss orders to limit potential losses. Diversification across different asset classes, sectors, and securities helps spread risk and minimize exposure to any single investment.
- Emotional Discipline: Emotions can cloud judgment and lead to impulsive decisions in the stock market. Successful traders maintain emotional discipline, staying calm and rational even during periods of market volatility. They avoid chasing trends or succumbing to fear and greed, instead relying on their trading plan and analysis to guide their decisions.
- Adaptability and Flexibility: The stock market is dynamic and constantly evolving, requiring traders to adapt to changing market conditions. Successful traders remain flexible in their approach, adjusting their strategies based on new information and market trends. They embrace innovation and leverage technology to stay ahead of the curve.
- Continuous Evaluation and Improvement: Successful traders are self-reflective and constantly evaluate their performance to identify areas for improvement. They keep detailed records of their trades, analyzing both their successes and failures to learn valuable lessons. They seek feedback from mentors or peers and are open to refining their strategies to enhance their profitability over time.
- Long-Term Perspective: While traders may capitalize on short-term opportunities, successful traders often maintain a long-term perspective. They focus on building wealth gradually through consistent, disciplined trading rather than seeking quick gains. They understand that patience and perseverance are key virtues in the journey towards sustained success in the stock market.
“By combining these elements—education, planning, risk management, emotional discipline, adaptability, continuous improvement, and a long-term perspective—successful traders navigate the complexities of the stock market and position themselves for profitable outcomes over time.”
My trading teacher always says..
You may be wrong but market is always right. And if you hate to wait than market is not for you.
Every one can earn a good money from market if trader has patience and give time to market for learning.
How to identity those area where professional traders placed their order we will discuses in next post.
Thank you.