All Profitable Traders Share One Common Trait

01/09/2016 6:00 am EST

Focus: STRATEGIES

Austin Passamonte, of Coiled Markets, thinks too many traders—perhaps even most out there—mistakenly believe they can logic and reason their way through trading efforts. Instead, Austin suggests traders follow a systematic approach to trading and outlines what that might entail.

A decade-plus ago when I began trading, financial markets were far different than they are today. SOES bandits, pre-earnings rallies, stock splits, and intraday trading options were all the rage. S&P 500 ES futures had yet to gain retail trader popularity, OEX options (ever heard of those?) were a much more popular instrument with at-home traders.

Yet to be mainstreamed were things like high-speed bandwidth, High-Frequency Trading, computerized algorithms dominating the market. Most commodity and currency futures were not yet electronically traded. QE programs were unheard of and mere mention of government meddling with financial markets was scoffed at as baseless conspiracy talk.

One thing I vividly recall from my early days was a frank conversation with a long-established broker. When asked off-the-record how many of their actual client accounts made consistent money trading any market / instruments, reply was a very small percentage. Something like roughly 5% of all accounts ever made an actual withdraw was the truth. I had similar talks with different brokers through the years and overall response was pretty much the same.

When asked what common features these consistently successful traders all shared, the responses were similar. All brokers affirmed that their profitable traders had some sort of systematic approach, something defined to base their trading actions from. Now that does not mean automated systems…it means a structured, methodical approach defined by guidelines that place statistical odds of probability on their side.

Too many traders, perhaps even most out there mistakenly believe they can logic and reason their way through trading efforts. Such is not the case. Never has been, is not true now, never will be in the future. Unless you find or create some sort of defined systematic approach, you will never succeed long-term in this profession.

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By Austin Passamonte of Coiled Markets

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