I very recently had the pleasure of meeting with a group of professional traders who have been very successful, but who are also looking to maintain and extend their success. Many of these are traders who can make or lose a million dollars or more--in a single day. How do such traders differ from the average independent trader who is trying to make a living? Several differences between the professionals and amateurs struck me:
1) Resources - These professionals had a wealth of analytic resources at their fingertips--and they used these resources. They had a keen eye for how their market should be priced and took advantage of occasions when it moved from that benchmark.
2) Information Networks - The pros knew other pros and constantly talked with them to find out what was going on in the marketplace. This network was an important edge for many of the traders.
3) Strategy - Every trader I talked with could enunciate his or her specific edge in the marketplace and, in some fashion, could quantify that. I could not find a pure gut trader in the bunch.
4) Adaptation - Each of the pros knew details of his or her P/L, but also detailed trading statistics such as Sharpe ratios. When the stats veered off course, they were quick to make adjustments.
5) Complexity - The professional traders employed complex trading strategies that relied on trading different instruments and timeframes, all to exploit a single idea. Many of these strategies involved hedges that managed risk, even as they aggressively pursued their ideas. The idea of buying/selling a single thing and exiting it never arose in my conversations with them.
The most striking difference is that the professional traders viewed their work not only as a career, but as a profession. They were in this for the long haul, and many had long years of experience. They almost always had advanced (often graduate) education in finance or related fields and understood the complexity of markets. They also possessed tools to quantify risk and reward that extend far beyond the popular trading literature.
The bottom line? Knowledge matters. Whether you're a carpenter, artist, or trader, it is very difficult to obtain professional results without professional tools and training.
For more on the development of expertise, check out the articles on my personal site: How Expert Traders Make Decisions; Parts 1 and 2.