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In this interview, Steve Patterson, a seasoned trader with over 30 years of experience, shares his insights on what makes a successful trader. Known for his adaptability and market versatility, Steve has traded everything from equities to forex, with a knack for identifying opportunities across different market conditions. With his extensive background, including years of trading everything from penny stocks to options, Steve’s approach to the markets is shaped by both his failures and successes. Whether you’re an experienced trader or a beginner, his candid perspective on what it takes to thrive in the markets is valuable.
In this post, you’ll learn how Steve’s strategy focuses on simplicity, patience, and adapting to market cycles rather than following complex patterns or relying on news. He emphasizes making money by focusing on easy trades first and then gradually expanding your skillset. Steve also discusses his philosophy of trading with the smart money, understanding market trends, and when to be patient, especially in slower markets like forex. If you’re looking for actionable trading advice that helps you understand the core principles of consistent profitability, this interview is a must-read.
Steve Patterson Playbook & Strategy: How He Actually Trades
The Path of Least Resistance
Steve Patterson believes in focusing on what’s working right now rather than trying to be the smartest trader in the room. He’s not trying to reinvent the wheel, but instead, he focuses on finding markets and conditions where the money is easiest to make.
- Focus on markets with volatility: Patterson shifts his attention to markets that are moving in predictable patterns or experiencing significant volatility. If there’s a market where price action is clear and can be easily exploited, that’s where Patterson focuses.
- Don’t be a hero: Avoid trying to master complex, difficult strategies or trying to fight the market. It’s better to trade what’s working and make money first before tackling harder markets or strategies.
- Adapt to market conditions: Patterson doesn’t limit himself to one asset class or strategy. He’ll trade stocks, forex, options, and commodities depending on market conditions, such as when earnings season makes equities more volatile or when a strong trend in oil presents opportunities.
- Trade the easiest trades first: Make your first profits with simple, low-risk trades before expanding into more complex setups. Patterson advises traders to avoid chasing after complicated setups that can lead to bigger losses.
2. Understanding Market Context
One of Patterson’s core beliefs is the importance of context when it comes to trading. He uses a combination of technical and fundamental analysis to determine whether a market is trending or if it’s time to take profits or switch direction.
- Evaluate market context before making decisions: Before entering any trade, Patterson ensures that he understands the broader market context. For example, he’ll analyze whether the market is trending or if it’s in a consolidation phase before committing to any position.
- Stick with trends: When the market is trending, Patterson always trades with the trend. He doesn’t try to fight it, even when he suspects the trend may be close to ending. Instead, he takes advantage of it until clear signs of a reversal appear.
- Look for signs of distribution or accumulation: Patterson watches how stocks behave during earnings season or major economic reports. If a stock or asset is showing signs of being sold into (even if it’s reporting good earnings), it could be a red flag that the market is ready to reverse.
- Avoid overanalyzing news: Patterson is critical of letting news headlines drive his decisions. Instead, he focuses on price action and uses news stories only as confirmation for what he’s already seen in the market.
How to Trade Forex (Steve’s Way)
While Patterson’s focus is mostly on equities, he also trades forex. However, he has a different approach for forex due to its unique nature, especially considering the influence of central banks.
- Be patient in forex: Forex trading requires more patience than other markets, according to Patterson. Because of lower volatility in certain currency pairs, it’s important to wait for the right conditions rather than trying to trade everything in sight.
- Watch for clear trends: In forex, Patterson waits for strong, identifiable trends before entering a position. He avoids trading in “chaotic” market conditions and looks for pairs with a clear directional bias.
- Understand the big players: Central banks play a major role in the forex market, and Patterson takes their actions into account. He monitors central bank activity indirectly, as their decisions on monetary policy often create larger trends in currency pairs.
- Trade what you know: Patterson believes that successful forex traders often need more time to master the market, especially with the limited number of currency pairs. He recommends focusing on a few currencies and getting comfortable with their price action before branching out.
Embrace the Apprenticeship Model
Steve Patterson has a strong belief in learning through hands-on experience, often referring to the “apprenticeship model” as the best way to develop as a trader.
- Learn by doing: Patterson recommends that traders find a mentor or work under someone already successful. Instead of spending years reading books, he believes traders should directly observe experienced traders and learn their methods through practice.
- Ask questions, ask questions, ask questions: One of Patterson’s key pieces of advice is to ask questions about everything. By understanding why a trader makes a certain decision, you can better emulate successful strategies. In Patterson’s own coaching, students who ask questions tend to be the most successful.
- Get feedback on your trades: When you’re new or struggling, it’s vital to receive feedback on your trades. Patterson coaches his students one-on-one, providing detailed feedback on each trade, so they can improve.
- Mentorship over courses: While many traders opt for courses, Patterson believes that personal mentorship is far more effective. You need someone to look at your trades, provide personalized advice, and help you grow as a trader.
Focus on the Big Picture
Patterson’s strategy also includes a deep focus on the bigger picture of market movements. He combines both fundamental analysis and price action to develop his overall market thesis.
- Track economic data and earnings season: Patterson keeps a close eye on major economic reports and earnings season, as these provide valuable information about where the market is headed. If he sees patterns in economic data or earnings reports, he adjusts his trading strategy accordingly.
- Watch for signs of institutional activity: Patterson is always looking for signs that big institutions are active in a market. If he sees that smart money is positioning itself in a particular asset, he will follow suit.
- Use fundamental analysis for market bias: Patterson often looks at whether the broader economy is bullish or bearish based on fundamental data like GDP, employment numbers, and corporate earnings. This helps him get a sense of the market’s direction before relying on technical indicators.
How to Find the Easiest Markets and Trade with the Trend
Steve Patterson’s approach to trading is centered on simplicity and making money by focusing on what’s working, not what’s hard. He believes that success comes from finding the easiest markets to trade—those that are experiencing clear trends or volatility that can be easily exploited. In his 30+ years of trading experience, Patterson has learned that rather than trying to master every market, it’s better to follow the money where it’s flowing. Whether it’s equities, forex, or commodities, Patterson shifts his focus to markets that are presenting obvious, profitable opportunities, rather than wasting time fighting against the tide.
Patterson’s core rule is to never try to be the smartest trader in the room. He advises traders to avoid overcomplicating their strategies and to resist the temptation to be “heroes” by trading difficult or low-probability setups. Instead, he emphasizes making your first profits by taking easy, low-risk trades and building up your confidence before expanding into more complex markets. By focusing on what’s working and adapting to current market conditions, Patterson has found success in diverse markets, demonstrating that you don’t need to be an expert in every asset class—just focus on what’s easiest to trade at the moment.
The Secret to Managing Risk: Trading What’s Working, Not What’s Hard
Steve Patterson is a firm believer in managing risk by focusing on the markets that are currently providing clear, profitable opportunities. He stresses that one of the most effective ways to manage risk is to avoid overcomplicating trades or trying to fight against the market. Instead of picking challenging or highly competitive markets, Patterson advises traders to focus on where the money is flowing. By trading what’s working, whether it’s a trending stock or a volatile commodity, you can reduce risk while increasing the chances of success.
Patterson also emphasizes that risk management isn’t just about setting stop losses or diversifying your portfolio; it’s about making smart decisions on where to allocate your capital. He believes in putting your money in markets that are easy to trade, allowing you to build your account steadily before tackling more complicated strategies. By following this simple yet effective approach, Patterson has been able to navigate a wide range of markets without taking on unnecessary risks, proving that sometimes the best way to manage risk is to avoid the most difficult trades altogether.
Why Patience Is Key: Avoiding Chaos in Forex Markets
Steve Patterson has a unique perspective on forex trading, emphasizing that patience is one of the most critical qualities a trader can develop. Unlike the fast-paced nature of other markets, forex requires a more measured approach due to its sometimes slower movements and higher unpredictability. Patterson believes that many traders fail in forex because they try to force trades during chaotic market conditions. He advises traders to wait for clear signals and trends rather than chasing every move. This approach helps avoid unnecessary losses and provides a more controlled, less stressful trading experience.
For Patterson, trading forex isn’t about taking advantage of every opportunity—it’s about picking the right moments. He stresses the importance of waiting for the market to align with your strategy and recognizing when conditions are chaotic. Trading in these high-uncertainty environments only increases the risk of failure. By being patient and only trading when there’s a clear, identifiable trend, Patterson believes forex traders can significantly improve their odds of success. It’s all about finding the right time to strike, not forcing the trade just because the market is open.
The Power of Context: How to Read Market Conditions Like a Pro
Steve Patterson places a strong emphasis on understanding the context of a market before making any trading decisions. For him, context means knowing whether the market is trending, consolidating, or experiencing volatility, and making sure your trades align with the current market environment. Patterson believes that many traders overlook this crucial step and jump into trades based on patterns or gut feelings, which often leads to poor decisions. By first assessing the broader market context, he ensures that his trades are based on solid, situational understanding, not just blind technical signals.
This ability to read market conditions gives Patterson an edge, as he can spot trends early and avoid markets that aren’t favorable for trading. He stresses that the market will tell you where it’s going; all you need to do is listen carefully. Whether it’s identifying whether a trend is likely to continue or recognizing when a market is in a consolidation phase, Patterson’s approach allows him to make informed decisions that align with the market’s natural flow. For Patterson, this context-driven approach is one of the key reasons why he’s been able to succeed across multiple asset classes and market cycles.
The Apprenticeship Model: Why Mentorship Beats Courses for Traders
Steve Patterson believes that one of the fastest and most effective ways to learn trading is through mentorship rather than traditional courses. Having experienced firsthand the value of learning directly from someone already successful, Patterson advocates for the apprenticeship model, where traders learn by observing and engaging with experienced mentors. He believes that the nuances of trading can’t always be captured in textbooks or online courses and that hands-on experience with real-time feedback is essential to becoming a successful trader.
Through his own coaching program, Patterson demonstrates the power of personalized feedback. He works one-on-one with his students, helping them refine their strategies by reviewing each trade they make and offering tailored advice. By focusing on the apprentice-mentor relationship, Patterson ensures that his students not only learn the technical aspects of trading but also develop the mindset and discipline needed to succeed. According to Patterson, this type of mentorship accelerates learning and provides traders with a deeper understanding of the market, giving them the tools they need to navigate it more effectively.
Steve Patterson’s approach to trading is defined by simplicity, adaptability, and a focus on market conditions rather than rigid strategies. Through over 30 years of experience, Patterson has developed key insights that help traders avoid common pitfalls and stay profitable in ever-changing market environments. His strategy emphasizes finding the easiest markets to trade, focusing on what’s working rather than fighting against the market. He believes in taking low-risk, high-probability trades, especially in volatile or trending markets, and encourages traders to build their success on simple trades before moving on to more complex setups.
Risk management is central to Patterson’s philosophy, with an emphasis on patience, especially in forex markets. He advocates for trading only when conditions align with your strategy and avoiding chaotic or uncertain markets. Patterson also stresses the importance of understanding market context and trends, using both technical and fundamental analysis to guide decisions. Rather than relying on patterns or news, he recommends observing the market’s behavior to spot the best opportunities. Lastly, Patterson highlights the value of mentorship over traditional courses. He believes that learning from a mentor and getting personalized feedback is the most effective way to improve as a trader. This hands-on approach accelerates learning, helping traders avoid common mistakes and fine-tune their strategies in real-time.
