How do some traders just keep riding the money train, while most others seem to stumble about with few wins and far more losses? Some might call it luck, some intuition, and some a “sixth sense”. To professional traders, it’s more of a data-driven, repeatable process. You see, pro traders do not “predict” markets in a mystical sense. They anticipate high-probability outcomes using specific tools based on statistics, behavioural data, and rigorous testing. Their methods come from a deep understanding of how markets actually behave, not how traders wish they behaved.

Most retail traders think prediction means guessing the exact top or bottom of the market. Professionals know that isn’t the case. They focus on understanding the conditions under which markets move in a certain direction.

These conditions form repeatable patterns, and once identified, they can be used to make informed decisions. The real difference between retail traders and pros is not access to secret tools, but the discipline to combine data, probabilities, and market structure into a clear, coherent decision-making framework.

This brings us to the question that many traders keep asking on how do pros know what’s coming? Let’s find out.

How do pros know what’s coming?

Professional traders do not rely on a single chart or indicator. Their competitive edge comes from confluence, or multiple independent indicators lining up at the same time. Now these indicators come from sources most traders rarely use – such as option chain, volatility clustering, order-flow imbalance, macro-micro crossovers and quantitative regime models. But equally importantly, pro traders back-test these indicators with historical data, refining rules until they’re consistently reliable.

Retail traders often obsess over timing entries, but pros approach the market from a different angle altogether. They first ask: “What type of market am I in? Is it trending, range-bound, expanding in volatility, or uncertain?” Then they look at signals to answer these questions. This top-down approach ensures that the strategies fit the current market environment.

Here’s how they actually work.

1.       Volatility clustering patterns

Unlike traders who look at direction first, pro traders look towards volatility because price direction typically follows volatility expansion.

Academic research, including the work of Nobel laureate Robert Engle on ARCH/GARCH models, has found that markets oscillate between periods of calm, followed by sharp expansion, also called volatility clustering. When there’s volatility compression for a long period followed by early signs of expansion, a directional move is quite likely, statistically speaking.

How do pros use this:

·            Look at Bollinger Bands contracting tightly along with Keltner Channels.

·            Track implied volatility against realised volatility. When the market’s expectation of future volatility starts rising (largely depending on option prices), while actual prices stay flat, it can be deemed that institutions are positioning for a move.

·            Use ATR (Average True Range) expansion as confirmation.

This method is generally taught in professional quant training and used by hedge funds, as volatility determines price direction more reliably than most indicators. Pros study volatility.

Knowing where volatility is rising by using tools such as the NSE option chain helps them anticipate whether large players are hedging, speculating, or expecting a sharp move.

2.       Order-Flow

Retail traders look at charts, but professional traders look at the demand gap between buyers and sellers. They want to know how aggressively buyers are buying, and whether sellers are absorbing that pressure, or stepping aside.

Large executed imbalances are often followed by price swings. So, if there’s strong demand, it will push the price higher until you have more sellers than buyers. Similarly, relentless selling forces the price lower until buyers step in. Simple supply-demand logic, with more precision because order flow shows it before the candles do.

How do pros use it:

·            CVD (Cumulative Volume Delta) measures net aggressive buying or selling.

·            Footprint charts that show traders the volume traded at precise price levels.

·            Liquidity heatmaps, used alongside the option chain that show where institutions are placing large resting orders and option positions.

These tools give pros a clean view of market intent even before candles begin to show them.

3.       Market regime rotation

As mentioned earlier, pros do not use one indicator. Similarly, they do not use one strategy. They use several, depending on the  “market regime”. The market regime is essentially the current personality of the market. The markets shift between regimes such as:

·            High momentum / low volatility

·            High volatility / mean-reversion

·            Sideways / range-bound

·            Trending with macro catalysts

What works in one regime would not work in another. A breakout strategy that works in a high-momentum phase will not do well in a range-bound regime.

What pros do:

·            Use indicators like ADX or R² regression slope to track trend strength.

·            Use 20-day historical volatility to distinguish the volatility regime.

·            Use rolling Sharpe ratios to see if the strategy is working.

Pros also look at market breadth, sector rotation, and cross-asset relationships (such as bond yields vs equities) to confirm regime shifts. This allows traders to tinker with their strategies and switch if needed from breakout setups to range-bound ones or from directional trading to options volatility plays. Much like leg days at the gym, pros never skip tracking regimes.

4.       Macro influences

Pro traders know that macro events shape patterns more decisively than indicators. Currency strength, interest rate events from the RBI, and liquidity cycles all significantly affect trends. Markets are interconnected. When bond yields spike, equities often react negatively.

How to pros leverage this:

·            By using macro triggers (CPI, PMI, RBI tone) to define bias.

·            Using microstructure data such as order-flow and volatility to time entries.

·            Using structure breaks, retests and moving averages to refine risk

Pros monitor central bank commentary, inflation trends, geopolitical developments, and sector-specific events. Macro events create the context for market movements, while micros help in timing.

5.       Back-Testing and Walk-Forward

It’s one thing to have technical knowledge, and a whole different ballgame putting it into practice. Pro traders test everything, going back 10-20 years of data to test their strategies. Back-testing reveals whether a pattern is statistically reliable or merely looks good on a chart.

Then they conduct a walk-forward analysis to see if their strategy still works on data the trader has never seen. This ensures that back-tested strategies do not fail in live situations.

6.       Crowd psychology

Research from Daniel Kahneman, Tversky, and Thaler shows that humans chase trends too late, panic at bottoms, and overreact to news. Pros exploit this behaviour because crowd reactions are often predictable.

How do they do it:

·            Trade against fake breakouts caused by panic.

·            Buy when the markets calm down after panic selling.

·            Enter before retail stops get triggered at obvious levels.

Professionals study common behavioural patterns such as fear of missing out (FOMO), anchoring and loss aversion. This is pattern recognition backed by research on investor psychology.

Are there any limitations to these strategies?

No pro trader will ever guarantee success with their methods. Considering that most of the strategies revolve around historical data, critics argue that markets will react differently to unforeseen events. A depression in the 1930s is not exactly the same as a depression in the early 2000s.

During market regime changes, gaps in strategies can be exposed, especially when macro factors are dominating the headlines. Black swan events, liquidity shocks, regulatory changes, and random geopolitical events can all disrupt even the most carefully laid-out systems. The pros know this which is why risk management remains central to their process.

Conclusion

There is no magic formula. But there are multiple indicators, as discussed above, that when viewed together, can point in a statistically relevant direction. Volatility signals, order-flow, behavioural psychology, macro events, and microstructures all come together to reveal a probable outcome. Probable, not certain. And that’s the mindset that separates pros from the rest.

With the right data, structured analysis and disciplined execution, you give yourself a real edge in the markets.