How to Become a Professional Trader

Consider Becoming a Professional Trader

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To become a professional trader, you must learn trading basics and advanced basics. Once these are mastered, you can learn proven strategies and gain experience implementing them. Also, be realistic about this profession. There is no perfect method of trading that solely produces winning results. However, if you practice recognizing information that is accurate from that which is incorrect or misleading, you can spend most of your time focusing on information that will make you a more efficient trader.

Trading Basics

One of the most efficient methods for learning to trade is knowing market and trading basics. A solid understanding of the basics provides the foundation that will support your entire career. This knowledge is required before more advanced trading information can be successfully implemented.

Trading basics include all of the factual information about trading, such as:

  • What markets to trade
  • How prices move (bid and ask prices)
  • Order types and how to place them
  • Risk management
  • Trading hours
  • How to monitor trading performance
  • How much capital is required to trade efficiently

Trading basics are typically factual in nature. There isn't a lot of subjectivity, and if there, it is relatively minor. One information source may say to start forex trading with at least $500, while another source may say to start with at least $1,000. One source isn't necessarily right or wrong. The information from multiple sources is indicating that you should definitely start with at least $500 and ideally with $1,000 or more. 

Books on trading found at your local bookstore, or reputable trading websites provide you with all the trading basics you need at a relatively low cost or no cost. The exchanges themselves provide traders with most of the market basics. For example, the New York Stock Exchange and NASDAQ provide educational resources on how the stock market operates through the main menus on their websites. The Chicago Mercantile Exchange does this for futures and the Chicago Board Options Exchange does the same for those wanting to learn about options trading.

 

Advanced Basics

Learning trading basics gives new traders an opportunity to learn about the various markets and the one in which they want to trade. When learning the basics, traders determine if they want to trade stocks, futures, options or forex trading. Upon making this choice, they can then delve deeper into the trading basics specific to that market. For example, a new options trader needs to learn about options Greeks, which help determine the price of an option. Those interested in futures trading need to learn about ticks, points, and the various specifications for each futures contract they may want to trade.

Stock traders need to learn how to short sell, how dividends work, and the differences between pre-market trading and trading during normal hours. Forex traders need to learn about pip values and daily rollover rates.

Trading Systems and Techniques

Upon learning trading basics and then learning about the market being traded, the next step is to learn strategies that will produce a profit in that market. Such strategies are subjective, which means the source of the information matters. Free resources may provide generic strategies that worked at one time, but no longer work. Finding viable strategies requires much more research and verification than learning trading basics. When learning strategies, review charts and look for examples of the strategy at work.

If it seems it could be profitable on your own little real-world test, then continue investing some time in the method. If not, leave the method alone.

The best method of learning a trading technique is to find a professional trader that will teach you their trading technique. Some professional traders offer websites or books highlighting their methods. They may also provide personal mentoring, which is the most direct approach for learning how to trade.

It is also possible to learn a discretionary trading technique without any form of instruction. Self-learning is fine, but it may take longer to come up with a profitable system when compared to learning a system that is already profitable. Many professional traders develop their own trading methods by looking at charts, noticing certain patterns or tendencies, and then developing a system that exploits those tendencies. This may take months or even years of testing before the trader finds a viable method that produces profits consistently.

 

Gain Experience

Practice doesn't make perfect. Perfect practice makes improvements. In trading, there are never perfect results because not all trades are won. And that is okay. You don't need to win every trade to produce a good living. What is required, though, is implementing your method nearly perfectly. This is within your control, while results are not. If you do the right thing, favorable results are more likely. Doing the right thing is following the methods you have learned and opted to use. 

When first learning a method it may seem very easy. However, when you begin to implement it, it may be harder than anticipated. Most traders quit at this stage and seek out another strategy. Unfortunately, these types of people rarely become successful. Even a simple trading strategy often requires at least several months of hands-on experience before the method starts producing profitable results. 

As a trader progresses and gains more experience, they will likely find ways to improve their strategies or notice other market tendencies that can be exploited if another strategy is formulated. A successful trader may also find that a strategy that once worked is no longer performing well. In this way, a trader is always learning from their experiences and trying to find better ways of performing their job. They are simply adapting to changes in the market that may make current strategies obsolete but provides an opportunity for a new strategy to be deployed.