3 Ways At Home Traders Can Be More Profitable Than Professionals

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Most at home stock and options traders think that professional traders have some magical advantage, or secret, that makes them more successful. As an options coach to a lot of students each month, I constantly hear this "sob story" from some of the beginning traders. They think that if they only had this "secret" trading method, they too can make a ton of money trading stocks and options. Honestly, there is not a huge different between professional trading houses and individual investors.

I'm sure you too have had these thoughts at least once cross your mind right? But this opinion is both based on faulty information and completely false. Individual traders can be much more profitable than professional traders.

70% Of Day Traders Lose Money - That WAS You!

The bottom line is simply this - most day traders are losers. Forbes reported on a study just the other year that:

North American Securities Administrators found that 77% of day traders lost money on a consistent basis.

Then, BusinessWeek was reporting that actually the numbers were higher and more like 82% of all day traders lose money. That data come from a study by a couple professors at the University of Taipei and the University of California that researched 66,400 investors over the course of a couple years. The major conclusion: the more you trade the less you earn.

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The Major Differences - Trading Plans And Risk

Now you will notice in the title of my post I said "CAN" and not "WILL" be more profitable. When you strip away everything else, professional traders are identical to at home traders. They both need to learn how to trade in the markets in a manner that is both safe and profitable. And we are all human and therefore we have emotions that effect our trading to a certain degree - myself included.

Here are 3 ways you can be even more profitable than professional traders:

  1. Treat This As A Business: Professional trader don't make money or have a job unless they are profitable. They can't pay their bills and feed their families with massive losses. As such, they realize that options trading is NOT the fast and easy way to riches. Obviously, having this attitude gets the typical at home trader into trouble very quickly. So treat this like a full out business. Have a strategic trading plan, proper risk management, and simple strategies. Protect your investment and reduce risk whenever possible.
  2. Money Management Is Your 1st Priority: All too often beginners focus on how much they will make on a trade rather than how much they can lose. Stop this right away. For our own trading alerts and strategies that we offer here, I always take the highly conservative route. I'd rather make a solid 2% gain than risk thousands of dollars for a possible 5% gain with considerably higher risk. Professionals protect their money at all costs, or they are out of a job and on the streets. Think long term on every trade and realize now that keeping money is sometimes more important that making huge gains.
  3. Master Some Technical Analysis Skills: If you've ever learned a basic skill, you know it takes time to master it completely. Trading is no different. You just can't pick up basketball and shoot 70% free throws right out of the gate. Even though we all know this to be true, some traders at home don't want to take the time to learn the skill of technical analysis indicators like MACD, Stochastics, RSI, and Bollinger Bands. If you actually commit time to these indicators and understanding how they work (and don't work) then I promise you will start to trade more consistently.

I Still Write This Blog For You (And Me)

The average at home trader these days are are looking for a magic system or a robot to do the trading for them. I'm here to help them and you realize that you are going to waste more money and time going the "get rich quick" route than you are if you had just learned how to trade correctly from the beginning.

Over the course of the last 4 years with this website I've seen many traders really take their portfolio to the next level - which is awesome! And I want to see more of you step up and make more money. We are not trading against each other and anything I can do here to help will only make me a better trader as well.

None of the things I've outline above can be implemented without a strong commitment to becoming a more successful trader. But no matter where your trading career takes you, I encourage you to learn as much as you can from professional traders.

Remember that "if you want to be successful, do what successful people do."

About The Author

Kirk Du Plessis

Kirk founded Option Alpha in early 2007 and currently serves as the Head Trader. Formerly an Investment Banker in the Mergers and Acquisitions Group for Deutsche Bank in New York and REIT Analyst for BB&T Capital Markets in Washington D.C., he's a Full-time Options Trader and Real Estate Investor. He's been interviewed on dozens of investing websites/podcasts and he's been seen in Barron’s Magazine, SmartMoney, and various other financial publications. Kirk currently lives in Pennsylvania (USA) with his beautiful wife and two daughters.