The Thinking Process of Highly Profitable Traders

By Yvan

The Thinking Process of Highly Profitable Traders

Successful trading is a skill, and anyone can develop that skill. This post covers how profitable traders THINK and what sets them apart from the rest.

Traders are constantly looking for a magic recipe to improve their game.

Everyone wants to learn the secrets of the highly profitable traders to eventually become one themselves.

So, what are those “secrets?”

And what is the difference between a highly profitable trader and a losing trader, or even modestly profitable one?

Well, if you have any kind of meaningful market experience, you’ll know that there’s no secret despite what some people want you to believe.

The difference between highly profitable traders and average ones is in their mind – it’s how they think.

Average traders will often focus on things like technical analysis, order flow, risk management… all great things to pay attention to.

But they often fail to address what I consider the most important element – their thinking.

So, in this article, we will see how highly profitable traders and investors think and what sets them apart from the rest.

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Thinking is central to human life. It allows us to plan, organize, understand, create…

But at the same time, many of us don’t use our thinking processes deeply enough.

thoughtful trader

In fact, that is what prevents the average trader from reaching their full potential: most of their thinking is unfocused and shallow.

For instance,

Average traders aren’t aware of their own biases –they obsessively seek out information that confirms their worldviews; they let greed control their decisions; they overestimate the importance of small runs, among many others.

They look at first-order consequences and omit other *perhaps hidden* sides of a problem.

They take information on face value and rarely think beyond the obvious.

They lack self-awareness –the basic ability to notice their emotions and thought processes as they’re happening.

And, curiously, these traders also believe that they have depth behind their opinions; and because they think that the facts on their side, they also refuse to be wrong.

But it’s not their fault. As people, we are generally not taught how to introspect and think in a deep and insightful way. Yet, it is a skill we are expected to know.

trader thinking process

But how can we know that without specific instructions especially in a world that pushes us towards scatteredness of attention and shallow thinking?

It’s not easy…

But, again, the people that aspire to get off this “average trader plateau” to become exceptional traders need to change how they think.

Let’s see how highly profitable traders and investors think.

#1. – Causes and Effect

Highly profitable traders look at the whole chain of effects, causes, impacts, and outcomes.

Because of that, they see the market and approach trading in a way that might look and sound like blasphemy from the outside but that makes great sense to them.

#2. – The Bigger Picture

Highly profitable traders can anticipate 2-3 moves in advance.

One basic point to illustrate this is the market meltdown we’re currently witnessing and the economic repercussions from the Coronavirus.

Now, do you think highly profitable traders are scared out of their minds and hoarding packs upon packs of toilet paper?

Or do you think they’re seeing this whole situation as an opportunity?

Whether that opportunity is in precious metals and cryptos as protection against inflation or in unfairly discounted quality stocks, it doesn’t matter, highly profitable traders see the bigger picture way before everyone else, and they capitalize on it.

#3. – Different Angles

Highly profitable traders approach multiple problems from different angles.

As said above, highly profitable traders view the whole picture; hence, as a direct result, they’ve developed a personal philosophy –one that helps them weather the ups and downs of the market or life itself.

#4. – Mental Models

Highly profitable traders analyze, dissect and make informed decisions based on their different mental models.

Mental models are the different ways in which we understand something in our minds.

There’s an old saying,

To the man with only a hammer, every problem looks like a nail.

Our mental models drive our responses to everything we experience and come in contact with—so, the more mental models we have, the better.

Highly successful traders usually operate on many different mental models.

#5. – Confidence

Highly profitable traders fully trust their own abilities, systems, and processes, and they never look for outside confirmation.

They are able to sift through the noise, nonsense, and self-serving narratives.

successful trader

Now, needless to say, the traders that are able to go at such a deeper level of thought often go on to develop a level of understanding of trading, the market, and the world as a whole that few people have.

Their understanding becomes more sophisticated, nuanced, and insightful.

And that’s what makes them highly profitable!

That said, allow me to offer you six simple steps to help you deepen your thinking.

6 Steps to Help Deepen Your Thinking

#1. – Set Intentions

You have to want it. That’s the first step above anything else. If you don’t really want it, you won’t make it happen.

#2. – Find Time for Solitude

I’ll just leave this Warren Buffett quote here:

The best way to think about investments is to be in a room with no one else and just think. And if that doesn‘t work, nothing else is going to work.

#3. – Be Curious

Always ask “why?”

And then, like a child, ask it again… and again.

Don’t stop looking for answers. If something doesn’t make sense to you, look for ways to expand your knowledge so that you can eventually gain more clarity.

#4. – Read Widely –and Often

Read topics like philosophy, science, religion, psychology, economy, finances…

That’s how you develop different mental models, so that, following the hammer and nails adage above, not everything winds up looking like a nail to you.

#5. – Write a lot

Writing is such an essential part of how a thoughtful being ought to live.

It’s not just for people who want to write books. In fact, writing helps us think and make sense of the world. So, if you don’t write,  you’re not thinking –at least not to the extent that you’re capable of.

#6. – Meditate Daily

When your mind is calm and more focused, you’ll find that you are more open to the subtle messages that your mind tells you. You’ll see things that you don’t usually see.

winning trader

Last Few Words

Deeper thinking is not reserved for the few. It’s like anything, it’s a skill. And anyone can develop that skill.

In fact, successful traders and investors like Howard Marks, Paul Tudor Jones, Ray Dalio, Li Lu, or even Buffett and Munger, weren’t naturally endowed with such an ability.

They’ve developed it over time. (Their own saying, not mine.)

And it’s not about complex data analysis. It’s just an above-average ability to see through the noise –internal and external– and connect to the present moment in order to see reality in a non-biased way.

At its core, that’s what it’s all about!

So, work on becoming a more sophisticated thinker. And when you are, you can maybe share your mind with the world like I do via this blog and my Twitter feed.

If what you’re saying is interesting, insightful, relatable, and helpful, maybe you’ll gain a few followers and develop a reputation.

You don’t have to be unique or original, you just have to think for yourself.

But above all, by becoming a deeper thinker, you’ll become a much better market participant. You’ll detach yourself from the crowd and get a free license to print money.


But make no mistake: This takes time. You can’t be rushing the process.

Take it easy. One step at a time.

And if you think you could use some help, maybe consider taking the Trading Psychology Mastery Course.

In there, I help you become a more thoughtful, reflective trader. You’ll get to develop a mindset that works for you, not against you.

Here’s a $50 off coupon to get you started: EQUANIMITY

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