How to Become a Professional Trader

Take Your Trading to the Next Level

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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 in implementing them. 

Also, it's important to be realistic about this profession. There is no perfect method of trading that consistently produces only winning results. However, if you practice learning to discriminate accurate information from that which is incorrect or misleading, you can spend most of your time focusing on information that will make you a more efficient and profitable trader.

Trading Basics

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

Books on trading found at your local bookstore or reputable trading websites can provide you with all the trading basics you need at a relatively low cost or no cost. The 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, and there isn't much subjectivity. One information source may say to start currency or 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. 

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. 

Learning the 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.

Books on trading and instructional websites can offer information and lessons on these and other more advanced basics topics.

Trading Systems and Techniques

The next step is to learn strategies that will produce a profit in whatever market you want to trade. 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 small 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 to 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 continually studying 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 Some Trading Experience

Practice doesn't make perfect, but in trading at least, perfect practice makes improvements. You'll never achieve perfect results because not all trades are won, even by professional traders. 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. 

Use Paper Trading for Training

When first learning a trading method it may seem very easy. However, once you begin to implement it, it may be harder in actuality than you had 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. 

Many trading platforms offer a paper trading capability, which is trading with "fake" money instead of your own, real dollars. As you develop trading strategies, you can try them out with paper money and real-time market movements. Some platforms also offer historical market data, and many professionals use this to back-test their trading strategies to test whether the trades would work under various known market conditions.

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. 

The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.