Moves in markets are the result of mass psychology. Money is made in the markets by becoming a master of human psychology and supply and demand. It is well-known that trading is 90% mental. Winning in the markets is more defined by your mental make-up, than your trading style. Understanding how people think is more important than chart reading.

It is time to start considering where your beliefs about what works and what does not work in trading come from.  In life, which includes trading and investing, most of us tend to repeat the same processes over and over, while expecting different results.  Over my many years in the business of trading, there are some very clear differences between the consistently profitable trader and the consistently losing trader.

The Novice Trader

1. They tend to follow the herd.
• They watch and do what others are doing.
• They take comfort in numbers and stay with the herd.

2.      They avoid taking risks unless others are sharing it.

3.      They feel that if others are buying then it is “OK” for them to buy, too.

4.      They act on the advice of so-called market “experts,” i.e., the advice of market gurus, CNBC analysts and their brokers.

5. As humans, they tend to complicate the trading process and ignore the important simplicity of the markets.

6. They always make the same mistakes. They buy and sell after a move in price is well underway (late entry with high risk) and they buy into resistance and sell into support (low probability).

The Consistently Profitable Trader

1.  They lead the herd.

2.  They tune out the subjective noise that can get in the way of making proper trading decisions. They do not care what others are doing and make decisions based on a mechanical and unemotional set of criteria based solely on the laws and principles of supply and demand.

3.  They learn to identify the proper entry that most people never see.

4.  They buy after a period of selling and into support. They buy fear.

5.  They sell after a period of buying and into resistance. They sell greed.

Successful traders:

1. Can identify opportunity before other traders do.

2. Execute trading plans mechanically.

3.  Have the ability to spot ill-informed individuals in any market and any timeframe.
These ill-informed individuals buy at price levels that are too high. You know by     objectively assessing real supply and demand.

4. Have the tools, knowledge and ability to take the proper action when this ill-informed market player appears.

5. Play the bandwagon correctly.

6. Know how other market participants think and react when they are correct and, more importantly, when they are wrong.  Price patterns are thought patterns.

Mental Musts…
1. Confidence
2. Discipline
3. Patience

How to get these…
1. Reduce and eliminate subjective analysis.
2. Learn to fight the urge to do what others are doing and make decisions based on    mechanical and unemotional set of rules and criteria.

The Proper Entry
• Know where to enter at support and resistance – Smart money enters here.
• Trade with the trend – Putting the odds on your side.
• Entry must be low risk – Most important part of the trade.
• Enter before others – This is how we get paid.

One of the most important things to understand about proper trading and investing is that conventional visible confirmation and opportunity are inversely related in trading.  Those who know get paid from those who do not – that is how the markets work.