Lessons to learn from professional trading strategies

In this article, we will display the various kinds of professional traders and then take advantage of what you can learn from them when creating your trading strategies.

Types of professional trader :

Implementers: Traders of other people’s ideas.

Reactors: Traders who monitor a handful of tool and react to events and to or traders

Autonomous: Traders trading their ideas.

Implementers: Traders of Other People’s Ideas

At large fund management firms, the decision of what to buy or sell is made, by one or a range of fund managers. Fund managers also decide how big each specific investment will be.

It is then the job of a professional trader to perform that order, to buy or sell in a reasonable period at the best price possible.

Performing other people’s orders may not seem like a very skilled job but when there is a lot of money at stake, it pays to employ skilled traders capable of executing professional trading strategies. Let’s look at a hypothetical example.

Performing an order this large will tend to move the market price against you; in this case, push the price downwards through an increased supply of shares in the market, whilst you are trying to sell. This lowers the value of your trade and your profit. 

The market move would be much worse if anyone worked out what you are trying to do.

Therefore..

the trader’s job here is to perform the order as fast as possible with as little price trouble as possible before anyone works out what they are doing.

Reactors: Traders who monitor a handful of instruments

Our second group of traders limits themselves to watching a handful of instruments.

There are 2 causes why traders may want to watch a limited number of tools:

1- They might be market makers. Market makers give a price that people can buy at and sell at. That way, other market members are certain there will be liquidity available whenever they need it.

Market makers get fees or special benefits from the exchange. They make a profit from the spread, the difference between the buy and the sell prices.

Because market makers are always exposed, they need to be right on top of the market and watch the order flow coming into their stocks and they need to be notified of any news likely to move the market. Then they need to react appropriately.

2- To spot and react to trading opportunities. They will be on the lookout for scheduled or unscheduled news and events that influence their patch and any unusual trading activity.

Autonomous: traders of their ideas

After much deliberation and analysis, traders decide to perform their plan. Traders discuss their ideas and search for people who will don’t agree with them because they want to ensure they have not missed any angles.

What can we learn from pro-trading strategies?

Focus

All 3 of our trader kinds focus.  They don’t attempt to be everywhere at the same time, they do less but to do it better.

Learn the dynamics of your markets

Learn the dynamics of the markets (professional traders, especially Reactors)are trading in:

What are the busy and less busy times?

And What size are the typical orders?

What is the total trading volume on a typical day? etc. 

Manage your emotions

Traders will have good and bad days. Deal with it now. Don’t let your feelings catch you by surprise and capture your thinking.

Analyze trades from different angles

Professional traders look at:

 1-The economy.

 2- The sector.

 3- The company. 

 4- The fundamentals and the technical analysis. 

 5- The order flows on their specific tool.

 6- The price chart.

 7- The newsflow, etc.

implement risk management:

All pro traders perform well-thought-through risk management rules. Read more 

6- Look for hedging opportunities:

Professional traders hedge their trades whenever they can.

7-Never stop learning:

Pro traders never stop learning. They always try to learn from their good and bad experiences.

About Marketsbloom:

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