There’s Only 2 Kinds of Traders Making Money

There are hundreds of trading styles out there. There are dozens of markets to trade. There are multiple time-frames to trade on. But there are only 2 kinds of traders that are making any money. And the only question you need to be asking yourself is: am I one of them?

If you are one of these types of traders, you know it. And your trading statements show it. If you’re not, that doesn’t mean you should panic. You just need to transform yourself. And that’s very possible to do once you see the need for it and commit yourself to the correct path.

So what are the two types of profitable traders? Well, to understand that, you have to realize there are two basic ways to make money as a short-term trader (we’re not talking investors here). One way is through a purely mechanical system or algorithm that has a consistent edge. The other way is through judgment or discretion to consistently gain an edge. That’s not any special insight. In fact, it’s pretty common knowledge. But what isn’t common knowledge is how to actually do either one of those things.

The First Kind

Starting with the mechanical or algorithmic side, I see so many traders, especially on the forex side, buying systems. Systems that are back-tested for years and can supposedly bring great consistent profits. Let me tell you from now, if you’re one of those traders that’s always searching for a great system, it’s never going to happen for you. Why not? That brings us to our first type of profitable trader. You see, the consistently profitable mechanical trader is someone who is extremely versed in programming, math, and statistics. First and foremost, he knows how to back-test correctly, and how to avoid the multitude of statistical biases and errors that can arise. Even traders who aren’t looking for a magic system often make the mistake of thinking that their back-testing has any merit. More often than not, it’s mired in numerous statistical errors that leave it not only incorrect, but worse yet dangerous to their trading account. Trust me when I tell you the math and statistics of correct back-testing and system building are extremely complicated. Unless you’re a math and statistics whiz, you don’t stand a chance.

But there’s another quality that the profitable mechanical trader has that separates him from the rest. And that’s that he truly understands the markets in a deep way. This is of vast importance because market conditions (like volatility and directional conviction) are cyclical and they go through different kinds of patterns over time. So even if you were given a solid algorithmic system by a great mechanical trader, you still wouldn’t be able to make money from it over long periods of time because it would need to be fine-tuned to adapt to changing conditions. Also, the great mechanical traders will often have several systems and they’ll choose which ones to employ at what times based on their deep understanding of market behavior. Not as easy as it seemed is it?

The Second Kind

This is the type of trader that most are familiar with and can relate to: the discretionary trader that makes ongoing decisions to trade the market. But what is the profile of the profitable discretionary trader? It’s simply this: he thinks and trades contextually.

Like the profitable mechanical trader, the successful discretionary trader has a deep understanding of how the markets work. And he takes that understanding and analyzes everything through its lens. There is no focus on indicators and patterns like the vast majority of traders. No. This trader knows that those things mean nothing out of context. They cannot be traded in a vacuum. So this trader focuses on complex contextual analysis. He uses simple principles and techniques, but puts them within a complex mental map of the markets. Why complex? Well, because the markets are complex. This trader doesn’t listen to all the false gurus and educators out there who don’t really trade and who say that you need to focus purely on simplicity. He realizes that simplicity is found in the principles and techniques (and he does keep those simple), but putting them into correct market context is anything but simple. It takes study, practice, and dedication over time. But it is possible. And that’s all this trader focuses on.

So while most traders are searching for patterns, and setups, and indicator combinations, the profitable discretionary trader is honing his skill-set of reading the market. He is building ever-more complex mental maps of how the markets really work, and always putting things into context. And this separates him from the rest.

What Kind Are We?

If you’ve followed this blog for any length of time, you’ll realize that we are the second type of trader. We don’t have a passion for math, programming, and highly complex statistics, so we don’t try to back-test or build systems. We realize that unless we are top-notch in all those skill sets, we’re more likely to hurt than help ourselves by going that route. So we go the route of making discretionary decisions. This doesn’t mean that there is no structure to what we do. Far from it, we have a structured framework that we follow to guide our decisions and make sure they’re not random or inconsistent. But we don’t tell everyone it’s so simple and it can easily be done if you just learn our system. That would be misleading.

The reality is that it can be learned, but it’s not easy. It takes time, dedication, and effort. That’s why we built such a comprehensive training program when we set out to teach others what we do. We knew that we had to teach them not only trading techniques, but how to actually read the market, and how to think contextually. Very few out there in this industry are doing this. And that’s because it’s not popular. It’s much easier to sell education products that promise easy solutions that work super quickly. But that’s not reality. So we’ll take the unpopular route and tell you that it’s hard. And it takes time and dedication. But if you want it bad enough it’s more than possible. And if you want to join the ranks of profitable traders, you have to understand what it means and be willing to do anything and everything that it takes.

If this is you, then you too can be one of the 2 kinds of traders. And you’ll realize that the rewards of going this unpopular route can be truly remarkable.

  • J

    No bull****, just the honest truth, even if it’s what most people don’t want to hear–just what I expect from you guys. Good stuff.

    • Ziad Masri

      Thanks J. We’ll always be about providing only the truth without BS no matter how unpopular it is.

  • Marton

    Hi Ziad, I wrote you guys an e-mail earlier this week asking a few questions in connection with / before ordering the course. When can I expect to get a reply? Thanks in advance. Marton

    • Ziad Masri

      Hey Marton,

      We usually answer emails within 24 hours, but your email never reached us for some reason. I checked our spam folders and it’s not there either. Can you please send it again? Thanks.

  • JOel

    even if you are a discretionary trader, you still need to incorporate basic statistics and math into trading, you do need to back-test strategies otherwise how do you define the edge to begin with. If you have followed FT71, he details how he uses statistics within a contextual space, harmonic rotations, how often we close gap etc.

    • Ziad Masri

      Hi Joel. In the post I mention highly complex statistics needed in mechanical trading, but I don’t say anything about not needing a solid grasp of basic statistics if you are a discretionary trader. Basic statistics can be readily understood by most traders, and I’ve actually written numerous posts about the importance of basic statistical thinking and in the training program we teach that in great detail.

      As far as back-testing, the things you refer to are actually not back-testing. What you refer to is the study of historical market tendencies, and we also discuss numerous ones in the training program and teach how to use them as a decision support tool to gain an edge in both entries and exits. True back-testing is far more complex, including specific entries, stops, profit exits, etc., and should only be conducted by someone who can do it properly, or its results will be flawed.

      Thanks for the comment and the opportunity to clarify.

  • Hanfei

    This is highly contextualised to day trading because the day trading environment is highly complex given the number of variables that can affect price. Also there’s a huge margin for error as you are going after smaller price movements.

    For longer term traders the variables reduce themselves and analysis gets easier. For anyone starting out I personally feel that you guys should encourage profitability through the swing trading or longer term trading approach for them to develop these market reading skills before they put themselves to the harsh test of day trading discretionary.

    • Ziad Masri

      Thanks for the comment. We believe the markets are fractal, meaning that they display the same type of behavior across all timeframes. I don’t think it’s easier to swing trade than it is to day trade. Also, day trading allows for much faster learning because traders get exposed to many more patterns and trades in a shorter period of time. So, ironically, while it seems harder, I think day trading is the perfect vehicle for the serious trader to start with. The beginners can learn on a simulator before they risk money. And when they start with real money, day trading actually allows for the tightest risk control. So I have to respectfully disagree on this point.

      • Kishan Bobba

        I always believed trading the larger time frame makes lot of sense.I preferred small time frame ‘only to understand’ the chaos rather ‘being’ in the chaos.

        But the kind of consistency ziad & Awais showing…. hats off to them

        • Ziad Masri

          Thanks Kishan!

  • Sarah Willis

    Really enjoyed this! I don’t have a passion for math or highly complex statistics either and having just started my Forex trading journey its always encouraging to hear that I am not the only one who isn’t following highly complex analysis’s! On a similar note I thought this test on what kind of trader you are was really interesting. I am a shark trader apparently! How accurate do you think this is?

    • Ziad Masri

      Thanks for the note Sarah. I took a look at the test and I don’t think that test means anything at all. It’s simply a little marketing thing put together by gomarkets. It’s far too simplistic to mean anything to a serious trader, and 5 general questions like that have no statistical validity. The fact that you know what you have a passion for and what style you’d like to trade is all you need to know. Everything else has little to do with some inherent kind of talent and natural trading ability, and everything to do with hard work and dedication. Best of luck in your trading journey!

      • Sarah Willis

        Hi Ziad, yeah this is just a light-hearted piece of content highlighting some of the main trader types – it’s not intended to inform trading strategies.

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  • Jason Russell

    The two kinds of traders I know that make money, are those that sell their services, and those you never hear about because they play a lone hand.

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