Our complete guide to professional trading strategies will show you how to trade contrary to the crowd and become a professional trader. This guide explains the most effective professional trading methods used by hedge fund traders, bank traders and traders. Looking at the way most hedge funds make trading decisions, you can apply the same principles to your own portfolio.
Trading is more than simply tapping on a few keyboards or using your favorite indicators to support and resist. Professional traders do more than that because they are well aware that this business requires time, effort and the right professional trading tools to be successful.
If you want to trade as a professional trader, there is no shortcut.
The good news is that anyone who takes the time can learn these specialized trading skills. You don’t need any special talent to become a professional trader, but you must have the right mindset and a truly proven edge.
How to become a professional trader
Professional traders are created; they’re not born! Richard Dennis, a legendary merchant who turned $1,600 into a fortune of $200 million, successfully trained a group of merchants called The Turtles. By experimenting with turtles, Richard Dennis has proven that anyone can become a professional trader.
Most hedge fund managers, bankers and institutional traders have learned to trade profitably from other successful traders. There are a few exceptions offered by professional self-taught traders, but they only prove the rules.
Learning to trade as a professional trader doesn’t mean working for a financial institution or trading a lot of money. A professional trader is someone who has proved he can consistently beat the market for a while.
Second, you need the professional attitude of a professional trader.
Some of the characteristics of a successful trader are:
- Professional traders are comfortable taking calculated risks.
- Professional traders are traders with self-control.
- Professional traders know how to ignore personal opinions.
- Professional traders do not accept any business losses on their accounts personally.
We can certainly add more to the list above, but these are more cases where amateur traders cannot pass.
Let’s take a look at some of the most popular professional trading methods.
How do you trade as a professional trader?
Brett Steenburgen, Ph.D. The author of The Psychology of Trading and a performance coach for all elite traders can summarize six traits. You can learn how professional trader’s trade by simulating the following features:
- Ability to focus (professional traders are quick thinking or deep thinking).
- Originality and creativity (professional traders can use well-known trading strategies, but the way they use them is unique).
- All professional traders have learned from mentors or other professional traders.
- Emotional resilience (treating losses as learning opportunities).
- Pay attention to details.
- Always try to improve this game.
Professional traders can recognize the strengths and weaknesses of trading and take advantage of these strengths. This is the term known as leveraging your edge. That said, professional traders do more of what works and less of what doesn’t.
To do this, let’s assume that a Professional Traders & Hedge Fund trader has decided that most of its earnings come from scalping the stock’s opening times. Meanwhile, he also noticed that he had traded terrible breakouts.
This professional trader can now boost his trading strength by trading larger position during the opening bell. At the same time, he will avoid trading breakouts.
Another professional trading method used by many professional traders makes good deals at once.
All the tools used by professional traders are equally important, but the best rule in our opinion is to do a good deal at a time followed by another good deal.
In his book One Good Deal-Inside the Highly Competitive World of Private Trading, Mike Bellafiore explains many features.
According to the book, a good trade deal is one that strictly follows your trading setup and your trading plan.
If you followed your plan, then this is a good trade, no matter whether the deal is profitable or a loser.
This means that a good trade deal is subject to the trading rules you set.
Of course, if you don’t have a margin, you can follow the trading rules as much as you like. They will give similar result.
So, the first thing you need is a set of profitable trades that have proven to be effective. If you haven’t started trading, you can start trading demo using a platform like MetaTrader4.
Equipment used by professional traders: Professional trading strategy
In the following section, we will share three effective professional trading strategies and give you some tips on how to choose the one that is right for you.
Here is the list:
- 80-20 strategies for expert day trading
- “Holy Grail” trading strategy (suitable for all markets and TFs).
- “Three Little Indians” trading strategy (for trading reversals).
The 80-20 trading strategy
The basic idea of this professional trading strategy is to display the price on a simple chart, especially on a candlestick with a long body and a small wick. In general, these candlestick patterns mean a market reversal. However, there are price characteristics that require checking for reversal signals.
The professional rules are as follows:
- The candle body must occupy at least 80% of the total candle size.
- Candle wicks should be less than 20% (preferably 10% on each side).
- As soon as there is a breakout on top of the momentum, place a buy order..
- You can put your stop- losses under the candle today.
- This is a great strategy to make a profit quickly (don’t expect much profit from this chart pattern).
This strategy works best in the futures market, but if you’re a smart trader, you can develop a few variations to make it work in your favorite markets: stocks, currencies or cryptocurrencies.
Below is an example of a sell signal:
Then we share our metrics-based strategy with you. This will prove that you can trade successfully not only with pricing measures, but also with indicators.
Holy Grail trading strategy (Professional Trading Strategies)
The name of this trading strategy is controversial, but it’s a simple one that anyone can use. You need to use the following professional trading tools:
- Average Directional Index (ADX) indicator
- 20th moving average
The rules for trading the Holy Grail are simple
- ADX should be over 30 and needs to rally.
- Wait for the price to test a 20-line moving average (this is accompanied by a fall in ADX and must be above the 30-line).
- Order above the top of the candle after the price reaches the 20 line.
- After placing an order, provide a protective stop loss underneath the newly formed low swing.
- Monitor your SL for profit or take a profit from the most recent high swing.
See an example below:
Below we outline one of the most profitable trend reversal patterns.
Three Little India Trading Strategies
Again, this strategy does not require professional trading indicators.
Three Indians’ trading strategy is purely a price trading strategy that can reward us instantly. The rules for this setup are very simple (sell signal).
- First, look for three symmetrical peaks (high swings) in succession.
- The elapsed time between each swing development is about the same.
- Take a short position as soon as the market falls below 20% of the second peak area.
- Place a protective stop loss over the newly formed swing high.
Basically, you want to predict when the third high swing will form. If you wait too long, your profits will decrease. This pattern works for both daily charts and lower timeframes. We love to trade the Three Little Indians trading strategy on the 5 minute chart.
See example below:
So, becoming a professional trader offers you the same opportunity as any other performance-related activity. Even if you can use the best professional trading methods, if you go without thinking properly, you will surely fail. Please Read our Professional Trading Strategies.
The two most important things to keep in mind are determining your strengths, learning how to get the most out of these trades, and secondly making one good trade deal at a time. Let’s know what you think in the comment section.
You want to learn more in depth? Visit Trader J Online School