What does it take to be a professional trader?

2023-12-21
Summary:

Professional traders require market analysis skills, a fitting trading system, effective risk management, and stable psychology.

In the financial market, trading is not a shortcut to getting rich quickly. Instead of viewing it as a 100-meter race, it is better to compare it to a marathon. When many people first get into trading, they may think that they can get rich quickly in a short period of time. However, this is not true. You may be able to make a profit initially, but over time, you may lose all your profits. Faced with continuous losses, many people are at a loss, and eventually their hard-earned money will be wiped out due to liquidation. Compared with doctors and scientists, a trader may earn more than their salary in a year, but this is not an easy task, so becoming a professional trader is a decision that requires careful consideration. Becoming a professional trader will be introduced below. What are the necessary conditions for traders, and provide some suggestions for people who are pursuing successful trading?

professional trader

What you need to become a professional trader:

  1. Skilled market analysis skills

    Professional traders first need to have skilled market analysis capabilities. This includes a deep understanding of the macroeconomic environment and micromarket dynamics. Through sensitivity to various information and analytical skills, traders can make more accurate decisions and grasp the pulse of the market. Various factors, such as economic indicators, financial report data, and political events, require traders to consider them comprehensively to form a comprehensive market understanding.


  2. A trading system that suits you

    People who trade must have a trading system that suits them. For people who trade professionally, whether they are trading stocks, futures, or spot goods, they must first establish a relatively stable trading system that suits themselves and adapts to the current market. This is just like driving a car; you must first have a vehicle of good quality that is suitable for you to drive and adapted to the road you are driving on. To drive on the highway, you must have a car with good performance, and to drive on the country road, you must have a car with a higher chassis.

    There is no right or wrong trading system, but it varies from person to person and only depends on whether it is suitable for the individual. Taking personal personality as an example, if you are an impatient person, participating in trendy long-term trading will definitely make you feel very troubled. This doesn't mean that long-term trading itself is the wrong choice; it just isn't right for you personally. If you choose a short-term trading system or an intraday trading system, then you are likely to get twice the result with half the effort, like a fish in water. Therefore, traders should realize that the choice of trading system varies from person to person and is not a matter of absolute right or wrong.


  3. Good risk management skills

    In the financial market, risks are everywhere, and never losing money is the basic rule of trading, which is also the idea of all people who trade. Professional traders need to have excellent risk management skills to ensure that they do not suffer significant losses due to one mistake in their trading. Effective risk management includes capital management, position control, and reasonable expectations of market fluctuations. Professional traders know how to set stop-loss points, diversify investment portfolios appropriately, and protect funds, which are the keys to long-term trading. Before each transaction, you must know your risk tolerance and reasonably control the position size. Remember, the key to long-term profitability is that profits should always outweigh losses.


  4. psychological stability

    Fluctuations in financial markets are inevitable, and professional traders need to remain calm, rational, and patient and learn to control their emotions and not be swayed by market emotions. When faced with profits, do not be complacent; when faced with losses, do not be overly pessimistic. The stability of psychological quality helps traders better cope with the ups and downs of the market and maintain a stable trading strategy.

    Many times in trading, success does not depend on how much effort you put in, but on your trading decisions. Rather than watching the market all day, professional traders know when to trade and when to take a break. Patience is crucial before, during, and after trading. Don't act rashly while waiting for your trade setup to match. Remember, you don’t have to trade every day; be patient enough and wait for high-quality and high-win trading opportunities.


  5. Don’t blindly follow other people’s advice

    Successful foreign exchange trading requires the ability to think independently and make independent judgments. You must be confident in your own trading decisions during the trading process. This sounds simple, but in actual trading, many people blindly follow the advice of others and make frequent changes because of a lack of confidence. Strategy.

    Each trader's risk appetite, financial situation, and trading goals are unique, and the opinions of others may not apply to your personal situation. Conducting your own independent research and analysis of the market will help you develop a trading strategy that meets your personal needs and goals.

    Moreover, the market is changing rapidly, and the advice of others may not fully consider your risk tolerance. Relying on the advice of others may not allow you to respond to market fluctuations in a timely manner. Keeping abreast of and analyzing market dynamics and making quick decisions are crucial to successful trading.


  6. The spirit of continuous learning

    There is no end point in trading, and learning is always on the way. The financial market is an environment full of competition and change. All judgments and behaviors of traders are based on in-depth market knowledge. Professional traders need to maintain sensitivity to new knowledge and constantly learn and update their knowledge system. . Learning from historical data, paying attention to the latest market trends, and participating in professional exchanges are all ways to become a successful trader. Only by maintaining a state of learning can we better adapt to the changing market.


  7. Make small but daily progress

    Successful traders make progress every day, making little tweaks and improvements that eventually add up to significant achievements. Do more things that work for you and eliminate factors that don’t. Correct one trading error every day from your previous trading experience, keep a transaction log, and track the transaction status. These three steps can help you make a small step forward every day, accumulate a little into something big, and gather sand into a tower. Under the influence of compound interest, this will bring about huge changes.


  8. Create an effective trading plan

    Professional traders need to develop and follow an effective trading plan that is directly related to the soundness, sustainability, and possibility of long-term success of the transaction. This includes clear trading goals, risk tolerance, entry and exit strategies, etc. Through an organized plan, traders can maintain a clear mind about market fluctuations and avoid being lost by market changes. Good trade planning is the cornerstone of successful trading and can increase the probability of long-term trading success.


  9. Efficient execution

    In financial markets, time is money. Professional traders need to have efficient execution after establishing an effective trading plan, which requires traders to be able to make quick decisions in the face of market changes, including identifying potential trading opportunities, judging market trends, adjusting risk management strategies, etc. The ability to make quick decisions can be developed through continuous market observation and practice.

    No matter how reasonable it is when formulating a trading plan, if unexpected changes occur on the spot during the trading process, you must respond promptly and be adaptable. Whether it is fundamentals or technical aspects, everything must be loyal to the market and remain objective during the trading process.

    When you take a heavy position, if the market trend is not in line with your own views, you must always be prepared to cut off your arm. This is easy to say but difficult to do. Many big guys who have been trading for many years find it difficult to maintain objectives. On the one hand, past experience will make them conceited; on the other hand, a sudden blow makes them lose their rationality and choose to carry the order. As a result, they lose their objective trading rationality.

    Timely response ability and decisive execution are the key factors in remaining invincible in a fiercely competitive market. The rapid understanding of market information and the ability to act accordingly will directly affect the success of traders.


  10. Good at summarizing experiences and lessons

    Professional traders must have the ability to summarize their experiences and lessons. Whether it is success or failure, every transaction is a valuable experience.

    Many people are afraid of failure, but failure may be due to various reasons, such as changes in market conditions, inaccurate technical analysis, improper risk management, etc. A careful analysis of the reasons for failure can help find the root cause of the problem and make targeted improvements. By summarizing and learning lessons in a timely manner, traders can gradually improve their trading strategies and their trading level. This ability to reflect is key to the growth of a professional trader.


The daily workflow of a professional trader:

  1. Check the fundamental situation every day. Although fundamental data is not directly used for decision-making, paying attention to major data and events every day can eliminate situations that are unfavorable to technical trading, such as non-agricultural market conditions or interest rate decisions.

  2. Study the overall market conditions and pay attention to the fluctuations of various products in the past week and day. Many people prefer more volatile varieties; choosing these varieties can increase profits and avoid waiting too long for less volatile varieties.

  3. Analyze the trends and patterns of volatile varieties and design corresponding trading strategies based on these characteristics. For example, for trending markets, you can use moving averages and other indicators to track, while for oscillating markets, you can use Martin strategies, etc.

  4. Involves specific entry and exit plans, determining the direction, entry point, exit point, and stop loss position of the transaction. This step requires filling out the strategies and plans in detail, just like construction drawings in a building.

  5. Develop a fund management plan to determine how to allocate funds based on the nature of the market. This includes both risk control and considerations of improving profitability efficiency.

  6. Develop a detailed risk control plan to prevent various risks, including position control and strategies to deal with emergencies, to ensure that funds will not suffer a sharp drawdown or liquidation.

  7. Execute trading actions according to the formulated strategies and plans, compile reports, check the entire transaction situation, explore room for improvement, and conduct reviews to continuously optimize the entire transaction process.


Five insights to share with professional traders:

  1. Always execute trades according to your trading plan.

  2. Focus on transaction quality rather than quantity.

  3. Always use stops.

  4. Reduce disk-watching time and avoid analysis paralysis.

  5. Be patient and wait for the price to arrive at the trade setup.


Becoming a professional trader is a path full of challenges. To face the fluctuations of the financial market, you need to have comprehensive abilities and qualities. Skilled market analysis, good risk management, stable psychological quality, the spirit of continuous learning, efficient execution, effective trading plans, the ability to summarize experience, and the establishment of a stable trading system are all indispensable conditions.


Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

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