Key Considerations to become a Full-Time Trader
by Dr Ken Long
When considering a change of profession to become a full-time market trader, there are numerous planning considerations that a working professional should take into account:
Assess Your Passion for Trading: Famous traders often emphasize the importance of having a strong passion for the markets. Without it, the daily grind of trading can become burdensome.
Educate Yourself: Before making the transition, it's crucial to educate yourself about different trading strategies, financial instruments, and market behavior.
Financial Cushion: Ensure you have enough savings to support yourself during the initial phase where you might not make a profit.
Risk Management: Understand and apply risk management techniques. Never risk more than you can afford to lose on a single trade.
Develop a Trading Plan: A well-thought-out trading plan is vital. This should include your strategy, risk tolerance, and goals.
Backtesting: Test your trading strategy against historical data to ensure its viability.
Start Small: Begin trading with a small amount of capital to limit potential losses while you learn.
Keep Emotions in Check: As noted by many successful traders and psychologists, emotional control is critical in trading. Don't let fear or greed drive your decisions.
Continuous Learning: The market is always changing, and continuous learning is necessary to keep up with new strategies and market conditions.
Networking: Connect with other traders to learn from their experiences and gain insights into the trading profession.
Physical and Mental Health: Trading can be stressful, so maintaining good physical and mental health is important.
Discipline: Stick to your trading plan and rules. Discipline is often cited as a key trait of successful traders.
Adaptability: Be prepared to adapt your strategies as the market changes.
Record Keeping: Keep detailed records of your trades to analyze your performance and learn from your successes and failures.
Regulatory Compliance: Understand and comply with any regulatory requirements that apply to trading in your jurisdiction.
Trading Platform Proficiency: Become proficient with the trading platforms and tools you will use.
Understand Leverage: Leverage can amplify gains but also losses. Make sure you understand how it works.
Set Realistic Expectations: Trading is not a guaranteed way to make money. Set realistic expectations to avoid disappointment.
Exit Strategy: Know when to exit a trade, both in terms of taking profits and cutting losses. Have clear criteria for when to get out of a position.
Long-term Perspective: Keep a long-term perspective. Success in trading often requires time and persistence, and it's important not to get discouraged by short-term setbacks.
Authors, traders, and psychologists have all weighed in on the topic of career change. Here are some of their insights:
Famous Authors: Authors like Napoleon Hill ("Think and Grow Rich") have emphasized the importance of having a clear vision and persistence in pursuing any new endeavor.
Traders: Legendary traders like George Soros and Warren Buffett have spoken about the importance of understanding your own strengths and weaknesses, as well as the need for rigorous analysis and emotional discipline.
Psychologists: Psychologists, including Daniel Kahneman ("Thinking, Fast and Slow"), have highlighted the cognitive biases that can affect decision-making and the importance of being aware of these when making significant life changes such as a career shift.