Back to top

Image: Bigstock

6 Lessons Learned as a Professional Trader

Read MoreHide Full Article

I have spent the last 14 years as a professional trader trading stocks, options and futures. Thankfully, there were many times during my career when I felt on top of the world. Unfortunately, there were also a few occasions when I thought it was all over and was close to throwing in the towel. I’d like to think I have seen it all at this point, but I’m am still learning all the time. What I have learned along away and perhaps the most important takeaway to date is this:

Traders who are successful learn from their experiences. BOTH good and bad.

Today I wanted to share some of what I have learned from trading bull markets, bear markets, elections, flash crashes and more. While I could go on for a fairly long time, I have boiled down all my trading experience to the 6 key lessons below. Enjoy!

1) Adjust to your Environment

The financial crisis was a terrible time for many, but due to the volatility, it was a great time for traders that knew how to stay nimble. The most important lesson I learned that year is to always adjust to the trading environment that is thrown at you. When the S&P 500 is moving 50 handles a day, there is no reason to push a trade; quickly letting winners add up is the better play. When the market slows down, it is paramount for a trader to also slow himself down in order to not overtrade.

The recent sell-off has bought back volatility and larger intraday moves in the market. Traders that did well over the last few years are likely struggling at the moment. Those that traded during the financial crisis have seen this before and adjusted, allowing them to profit off the volatility.

2) Overtrading

Patience and waiting for setups will help a trader become more profitable over time. When a trader isn't patient, it can lead to bad prices and overtrading trying to manage a bad position. Managing overtrading is a key to success, and for trade addicts like me, having difficulty with this is common. However, if it can be recognized it can be controlled.

3) Tune out the Noise

The bull market from 2009 to 2019 has taught me to ignore the noise and trust my instincts. Listening to the talking heads on CNBC can cause a person to get emotional and can tend to do more harm than good to a portfolio. Today's 24-hour-a-day media thrives on extreme news, and while stocks might react, it doesn't mean a single trade should be executed. Once a trader has been doing this for over ten years, he knows his own instinct and his ideas matter most.

More . . .


Profits in the Aftermath: Ends Sunday, September 8

If you’ve been in the market for any length of time, you’ve probably seen a perfectly good stock nosedive in price for no apparent reason. You may be looking at the aftermath of computer-driven high-frequency trading activity. Their favorite tactic is to trigger panic-selling on a strong company. They buy as it bottoms and collect big gains as price returns to a normal level.

Zacks Counterstrike portfolio scans the market for these Manipulated Price Drops – and turns them into profit opportunities for human investors.

Right now, this strategy has detected a selection of stocks that appear to be on the verge of their comebacks. Quick double-digit gains could be seen in as little as 1 day. Don’t delay. Access to these picks closes midnight Sunday, September 8.

See Counterstrike Stocks Now >>


4) Computers Run the Show

The flash crash taught me that I need to be aware of computer robot traders. It was pretty scary when I saw all the bids and offers on my screen magically disappear while the market went into free fall. Explanations for what happened that day varies, but what I saw is that HFT, algorithm, and robot traders no longer wanted to take risk and they simply unplugged their machines. The rest of us still trading were left holding the bag as there was no liquidity in the market whatsoever. I was lucky and didn't panic or else I would have had a multi-six figure losing day and my career could have been over. What I saw that day, as quotes disappeared from my screen, would forever change how I looked at trading. Now that the advancement of high frequency trading and algorithms has changed trading, it's important for the modern trader to understand how they work and operate.

5) The Only Thing That Matters is Price

No matter how much I love the stock or how big of an earnings beat they might have had, the only thing that matters is price. If the scenario played out just the way you planned and the stock continues to go down, something is wrong and the position should be cut. Price trumps everything because price pays.

6) Fear Means Something

Over the last ten years, I have become a student of the fear gauge commonly known as the VIX. The VIX measures the market's expectation of volatility over the next 30 days and can give traders a clue about what to expect on any given day. For me having one eye on the VIX at all times gives me confidence in the direction of markets over the short term.

What My Experience Has Taught Me

After all these years, my experience has taught me to accept that the market is a living breathing organism. It is not against you; it is not out to get you; it just exists as a marketplace where prices go up and down based on a wide variety of factors. Given that, the most important aspect for survival in trading and investing is discipline and risk management. This can be a difficult skill for both rookies and experienced traders to grasp.

Sometimes, up and down price movement is irrational. One of the major causes is what I mentioned in my fourth lesson above: computers run the show. These High-Frequency Traders can short millions of shares in tiny fractions of a second, driving stock prices lower and profiting on the way down. Then they buy the stocks at the bottom and profit even more as price rebounds to its fair market value.

My portfolio, Zacks Counterstrike is designed to spot these Manipulated Price Drops. We take advantage by buying the best of these unfairly beaten-down stocks. Then when price moves our way, we lock in gains and look for the next opportunity.

Today's marketing conditions can create a huge number of profit opportunities for nimble traders. Counterstrike looks to generate quick and consistent double-digit gains. In fact, we've recently closed gains such as +58.1% in 8 weeks, +14.0% in 18 days and +14.2% in just 2 days.

We're now holding a selection of stocks that are spring-coiled and ready to bounce higher.

Check out this portfolio today and you may also download our bonus Special Report, 5G: Top Stocks for the $12 Trillion Data Revolution. It spotlights 7 breakthrough companies with explosive growth potential as first-movers in the development and roll-out of advanced 5G mobile networks.

Important: To maximize the profit potential of our recommendations, we must limit the number of members who have access to the Counterstrike portfolio. This opportunity ends at midnight Sunday, September 8.

See Counterstrike and 5G Stocks Now >>

Wishing you great financial success,

Jeremy Mullin
Zacks Strategist

Jeremy Mullin has been a professional trader for more than 14 years with specific expertise in profiting from patterns set by High-Frequency Traders. He is the editor of Zacks Counterstrike.

Published in