He is a technical trader and uses high probability price patterns, to generate trading signals and conducts a huge amount of statistical analysis which is used to constantly generate high odds trading set ups.
Lets take a look, at some of the thoughts and trading techniques of Monroe Trout which can be used to trade Forex or any other speculative market.
Forex Trading Attitude
Monroe Trout is not a trader how is flash and as a rule shunned the limelight and one of the quotes he made bought a smile to my face:
" I don’t pull out any money. I rent my condo and I drive a cheap car". ( Monroe Trout)
The world's top traders tend not to be arrogant and are very focused on what their doing. Sure you see traders on TV who buy flash cars and tell you how wonderful they are but these are normally brokers getting rich on the back of trading commissions from clients and not from making money in the markets.
The great traders tend to be humble and this is because - its a vital trait for success in trading. The markets can be hard and brutal and must be respected at all time which all the great traders know, there is no easy money to be made and they know they have to work at and also, making sure, the market doesn't take what they have.
Arrogant traders tend to lose because as we have said throughout this site – there is no way to beat the markets and if you think there is the market, will simply empty your trading account for you.
A Reality Check and a Trading Edge
Of course today the Forex markets are promoted just like an online casino where you are told you can make 50 pips in 10 minutes or a set number of pips per day and get rich but Trout gives this view a reality check:
"they believe you can make tons of money with little work They think they can make 100% percent a year doing a little bit of research at the weekends. That’s ridiculous. (Monroe Trout)
Of course you need to get an education but getting an education is not enough to make consistent Forex profits - you need to have a trading edge. Your trading edge needs to be personal to you which you have researched and have confidence in, to beat the huge majority of traders who fail to make money:
"First, many people get involved in the markets without any edge. They get in the market because their broker told them that the market is bullish. That is not an edge. However, to tell the truth, most small speculators will never be around long enough to find out whether their system could have worked, because they bet too much on their trades, or their account is too small to start" (Monroe Trout)
In any industry you need an edge. A salesman will know what makes him good and so will a pro footballer - it doesn't matter what you do, if you have an edge you will do better than the majority and in Forex trading an edge is vital, due to small percentage of traders who make money trading.
Other points I found interesting about his trading style is he believes in streaks:
Yes, not just in trading but in most things in life. If a team has won eight games in a row, you don't bet against them winning their ninth game” (Monroe Trout)
I have always believed this especially in terms of losing trading signals – they come together and its at these times, money management is so important and Trout obviously has good money management, due to the low downside volatility he has on his trading systems.
The Round Number Suck
This is a lesson I think all traders can learn in any markets and here it is:
“Round numbers. For instance, when the Dow Jones starts creeping up towards 3,000, I’ll start buying some in anticipation of it going through 3,000. the 3,000 level acts as a magnet” ( Monroe Trout)
How often do you see this in currencies where 1.000, acts as a magnet in any currency pair. I also like numbers which are like 1.60 in the Pound 1.30 in the Euro which all traders are looking at to hold or break. Watch any round number in Forex pairs and you will see prices get sucked towards it.
Trout puts a lot of emphasis on patterns that other traders look at and while he doesn't reveal his strategy, he won't be going with the herd - he will be reacting to them and applying his trading edge to make money while they lose. My own view is to win at currency trading, you need to know your edge and have total confidence in it to make long term consistent gains and trade through the draw down periods which see most traders lose discipline.
Monroe Trout Jr is a major believer of the philosophical writings of Ayn Rand which many of the worlds top traders are and you can read more about it at her site or in the article, on this site on objectivism. He's an individual like all great traders, knows his edge over the markets and has worked hard to develop it and has applied his edge in the markets with spectacular results, making him one of the true great modern day traders.