Think Like a Pro to Trade Like One

I spent many years on trading floors in Chicago and I was always eager to learn. I had the opportunity to meet and befriend many experienced traders and brokers. I enjoyed their stories, which were often very entertaining. But I was mostly interested in the knowledge they gained in the trading pits and how to interpret price action. Most traders have a unique perspective and approach to trading, but they all have a few things in common.

Over the years I compiled a list of the queries professional traders wanted answers to before entering or exiting a position. This list has is tacked to a corkboard next to my desk and it has yellowed over the years. My guess is that it is over 25 years old, and I still refer to it daily.

My list with comments…

  • Who controls momentum? Bull or bear dominance
  • What is the length of a typical move? Average range
  • Is the timing right for a trend? Below average range and volume
  • Will the range be average or above or below? Volatility
  • Where will the fair value area develop? High volume zone
  • Where are support and resistance areas? Entry/Exit prices
  • Is there event risk? Economic reports, earnings etc.
  • What is the risk? Change in momentum
  • Is the market too rich or cheap? Overbought/oversold

There are many charting techniques and indicators that will help answer these questions. It really doesn’t matter which tools you use, but it is important to attempt to get the answers. If you are going to trade with the pros, you must learn to think like one.

John Seguin, Market Taker Mentoring

Trader Education