One Fatal Mistake that Stops You from Becoming a Professional Trader

Jarratt Davis

Special Consultant to the FPA
What stops you from being a professional trader?

If you can not make it as a professional trader, the reason is probably down to the issue of ‘switching’.

‘Switching’ is a major obstacle that almost every new professional trader has to battle with. It’s also the main reason why so many traders struggle to achieve consistent profitability.

If you are concerned that you are about to make the same fatal mistake, ask yourself the following questions:
  1. Does it seem that every strategy you have traded doesn’t work’?
  2. When you find a really great strategy, do you ‘back test’ it for a few days and then as soon as it goes ‘live’, it stops producing altogether?
  3. Have you traded more than three strategies in the last six months for no real reason other than they all seem to ‘stop working’?
If you have answered “yes” to one or more of the questions above, then I have bad news. I am sorry to tell you that you test positive for the deadly disease known as ‘switching’. There is no easy way to tell you that unless you can overcome the symptoms, the prognosis will be grim.

However, selecting and exploring different trading strategies is not a bad thing. In fact, it’s a critical component of a trading plan. Just be cautious.

Why trading large size is so different to trading standard retail accounts?

When trading large size (100 standard lots or more) you will encounter ‘slippage’. Sometimes this can be up to one or two pips each way (three to four pips per trade) and this can have a significant impact on your overall profitability.

When I began trading my first large account, I was risking ten pips and taking ten pips profit. Effectively, this was ‘scalping’. When ‘slippage’ was taken into account, however, I wasn’t losing ten pips, I was losing thirteen pips! Furthermore, I wasn’t making ten pips on my profitable trades, I was making seven pips. So, from an initial reward risk ratio of 1:1, I was now almost at 1:2 which, needless to say, the strategy couldn’t sustain. It was time for me to reconsider my plan and think of something different.

Which trading strategy to pick?

The main reason that I do not advocate ‘scalping’ to clients that are looking to eventually break into large-size trading, is because the margins are simply too tight. The last thing you want to be doing just after getting a large account to trade is coming up with a entire new trading approach!

So what do I recommend for a system that will be robust enough to stand up to the tests thrown at it by fund trading? Something with a minimum Stop Loss of 30 pips and a ‘take profit’ of about the same or more. Ultimately, the higher the better.

This will dilute the effects of any ‘slippage’ and allow you to trade confidently!

If you want to learn more about the strategies I trade, click here for my Trader Training Programme
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