How to become a trader
I started trading back in 2001 when my college buddy recommended to buy INFA. I bought 200 shares at $14 and held it for two years selling it for $8. Thanks for the tip buddy! During the next few years, I wasted a lot of time and money trying to learn to trade by myself. All and all, I lost around $5K after "playing" for about 3 years before work. I took some time off and decided to give trading another chance, but this time a real chance. I started trading in a prop firm where I had all the necessary tools to succeed. Under this new environment, I had only 4 down months out of 48 during my trading career. Most importantly, I only lost about $1500 to reach profitability. Pretty big difference from when I tried to learn by myself.
Today, I am a big advocate of building the right environment and mindset to start trading for a living. If you want to know what it takes to become a trader, here are some of the things you should consider (in order of importance).
Grit and discipline
You need the right mindset to trade for a living. Trading is not a get rich quick scheme that you steal some strategy, play big and make millions. It is hard work and it can be lonely, depressing and very humbling experience. Successful traders will overcome all of that. They are persistent during learning and difficult times. They are disciplined to trade large and small, they know their stops before they enter a trade, they know when to be agressive, they know how to manage their risks and they know there is no holy grail. If you don't have any of these qualities or skills, you can still become successful, but only after the market teaches you all these elements day after day after day.
Training & Education
While you can learn to trade by yourself, I believe most of us would agree that it would take a lot longer than it would if you learned from a top trading firm or mentor. I am tired of hearing that the best school opens from 9:30-4 and it is called the market, but you can greatly speed up your learning curve saving yourself time and money by learning from other traders. I am living proof of that. Trading without proper education is a waste of your time. Training will give you the foundation of trading and it will put you in a position to find your edge according to your lifestyle and personality.
Beware of scammers out there, but lots of successful traders get bored after years of trading and want to help traders and diversify their income. Find these traders or their schools, or get educated through any source possible like books, youtube, blogs, online courses, etc, before trading with real money.
TOP Trading Tools
I hate skiing because the first time I skied, I rented cheap equipment. I was in pain during the whole time. I never skied again, because it was a bad experience. If you decide to start your career with cheap tools, you will hate it and most likely you will fail and lose money. Trading is a business that does not require lots of starting capital, so invest some of your money in great equipment and tools such as:
- Fast computer with more than average memory, multiple processors and fast hd.
- Internet line and a backup
- Energy backup
- At least two fast response rate monitors (for scalpers)
- A reliable trading platform such as esignal or sterling.
- News tools like newstrike
- Trading journal and trade analytics software such as Trademetria
- A broker that caters for your specific needs. For example, if you want to become a scalping daytrader, choose to pay per share.
Mentorship with profitable traders
Ideally, you want to work with people that makes money. Most of us agree that trading is 90% psychology and 10% strategy. This means that learning 100% of a strategy won't be enough to make you successful. Only those who know how to make money can teach you the other 90%. There are exceptions to this rule, lots of people can teach you the basics, but you are going to improve much quicker among profitable traders. Find mentors who can show you real account statements or that are recommended by other successful traders.
Traders to talk to
Trading is a lonely business, but it doesn't have to be. Having access to other traders who are on the same level or better can only help you. I remember one trader that sat next to me calling a trade on CP. This institutional buyer was aggressively buying 10% of the stock's volume in one order. He called it out and the whole firm profited $15k from that order. Once you are experienced, you can trade anywhere you want, but try to be in an environment that you can exchange trading ideas, grow and keep you motivated. It can be a physical location, meetups, chat rooms or even an online forum.
In summary, here are some natural steps to become a trader:
- Decide why and how to become a trader
- Set personal and professional goal including stops
- Get educated
- Start paper trading (trading with a fake account)
- Improve your methodology until you make fake money
- Start live trading
- Stop losing money
- Make money
- Make money consistently
- Adapt or die
Don't skip any steps above, build the right environment and commit yourself. Sooner or later, your hard work, dedication and discipline will pay off and you will become a successful trader.
You can read more about my first few months here.