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How to Become a Trader

11 minutes
Beginner
Cristian Cochintu
Cristian Cochintu
25 March 2024

If you are considering becoming a full-time trader or professional trader, you need to properly establish yourself with the resources and mindset. Like any business, preparation, and planning are essential.

A full-time trader (sometimes named professional trader, forex trader, stock trader, CFD trader, or day trader) is a perfectly viable career, but it’s not necessarily easier or less work than a regular daytime job. 

The benefits are rather that you are your own boss, and can plan your work hours any way you want. Trading on a laptop/smartphone also means you can do it anywhere, anytime. 

How to Become a Trader - Quick Guide

  1. Research the markets: Build a strong foundation of knowledge about financial markets, as the level of risk and strategy required can vary between them. It is a good idea to start by researching the markets on offer to you, and make sure you understand the key differences between them.
  2. Build a trading strategy: The next step is to establish a trading strategy that will help you generate a profit in your chosen market, and define exactly how you will enter and exit your trades. A trading strategy is the driving force behind your trading plan – it should help quantify your goals, making sure that you are being consistent and aren’t just making decisions based on emotions.
  3. Gain trading experience: The final stage in becoming a trader is taking the plunge and trading for yourself. But there is no finish line: you can always do more to progress your knowledge of markets and refine your trading strategy. The best way to do this is to find out what works for you, by executing your strategy and back-testing the results.

       

Beware – there are many out there who claim to make a fortune as professional traders (forex traders, day traders, stock traders, and these days crypto traders), but usually, these people are trying to sell you something. Don’t believe the hype or that there is such a thing as “easy money”. 

There are ways to make it easier though – for example, you don’t need to make as much if you live in (or move to) a low-cost, low-tax country. Cutting down on living costs can also make a big difference, as “making a living” on something, in essence, means that income covers expenses. 

While trading does offer lifestyle flexibility and perhaps unmatched risk/adjusted returns, it also comes with substantial financial risk, detailed in the next sections. 

What is a Trader - Meaning and Key Facts

Online trading requires time and effort as with any other competitive, lucrative field. CAPEX Academy will show you some approaches that are easier than the usual trading methods, but even these require study and practice. Like achieving anything else worthwhile, especially a potentially lucrative, stimulating career, you’ll need the discipline for a sustained investment of time, effort, and money. You’ll suffer some uncertainty, frustration, and failure, with no guarantee of success, as you would in achieving anything else worth attaining. Sorry if we are bursting anyone’s bubble. Fortunately, you’ve got the right trading courses to minimize the drain on your time, emotions, and finances.  

Most Traders Fail within Their First Two Years  

While we’re trashing get-rich-quick illusions, here’s a helping of fear to keep you motivated and paying attention. Here’s a little fact you’ve rarely seen acknowledged on any website. 

The fact is this

Per available data, the odds are firmly against you. Most forex traders lose money and are gone within a matter of months. Regulators have reported that the vast majority (around 60-70 percent or more) of forex traders and day traders fail within their first two years. Few manage to last at day trading in general and become successful traders. 

Many take a rather simplistic view that because most traders fail, online trading should be avoided altogether by amateur traders or investors. By that same reasoning, one should avoid real estate and insurance sales and any other field that offers low barriers to entry is potentially lucrative and attracts intense competition from which only a minority prosper. Consider that one cannot even begin to practice in the most lucrative, skilled professions without years of professional training, typically costing tens of thousands in tuition, related expenses, and lost wages. After that, there’s a demanding battery of exams, followed by years of relatively low-paying jobs with grueling hours, commuting, office politics, and ass-kissing thrown in as you learn how the job is done. Even after passing through all those hoops, only a minority will make the big money. According to experts, only a few percent of the new hires out of college eventually become partners or find equally lucrative roles in the field.  

It’s clear that most traders don’t do the preparation needed to have even a chance to succeed. The small minority that attempts serious learning and practice have the huge additional obstacle of needing to somehow figure out how to design their own training program to duplicate the theoretical, practical, and mentoring aspects of other professional training programs.  

What sources to study? Which skills to learn in which order? What websites or forums to browse? What trading styles to start with? We’ve created CAPEX Academy for those like you, the sincere, serious traders or investors who seek the path to better results.  

Here is the good news:   

The failure rates are inflated by all those casual gamblers who were never serious traders. You’ll need the right preparation as you would for any profit-making endeavor.   

Should You Become a Trader? Benefits vs Drawbacks 

Despite the difficulty, there are some obvious benefits to a full-time trader career. To name just a few: 

No boss 
You’re your own boss. No more pandering to the needs of demanding and unreasonable bosses. You can work precisely the way you want. 
Overheads 
No more expensive train ticket to get to work. No more petrol and parking costs. No more pricey suits. You simply need a computer, an internet connection, and some capital to get going. 
Hours 
You set your own working hours. In today’s world, there is always a market open. So, you can choose when you want to work and for how long, fitting it around other commitments. If you want a four-week holiday, there’s no HR department to navigate first. 
Comfort 
Whilst everyone else is ironing their shirt for the day ahead, you can slip into some comfy clothes and begin your 15-foot commute to your desk, with a fresh cup of coffee. No more stuffy offices or distracting colleagues to deal with. You work from the comfort of your own home. 

Drawbacks 

Despite the obvious allures, comments about a full-time trader career for a living also highlight some downsides. The most prevalent of which are: 

Solitary lifestyle
 Your colleagues may have driven you up the wall at times, but sometimes it’s reassuring to have people around. Full-time traders can get lonely. If you don’t like being on your own, think twice. 
Inconsistent salary 
Your salary will fluctuate hugely. You might make $3,000 one day and then lose $2,500 the next. You probably won’t have a stable salary to rely on. On top of that, if you take the day off work, you won’t get paid a penny.
Career progression
 The only thing that can improve is your takings. You may also find it challenging to get back into the business world. Some forex trader forums have suggested you’ll be less employable by the end. Still, you have more chances to take a high-rated job in the financial industry (money manager, financial analyst, prop trader, signal provider) and so on.   
The battle against machines
 Algorithms, automated systems, and expert advisors (forex robots) are all taking over the market. They are now responsible for a massive 60% of all market volume according to market watchers. Whilst there will always be a place for humans in the market, you’ll need to find new ways to adapt and evolve if you want to maintain an edge. 

How to Become a Trader: Requirements  

Starting as a full-time trader is no easy feat, especially for a beginner. You’ll have a number of potentially expensive obstacles to overcome right after you understand what trading is, how it works, how to get started, and so on. Below the top tips have been collated, to help keep you firmly in the black. 

Setup 

The question on many aspiring traders' lips is, how to start as a trader? The answer is you need just a few fundamentals. Get those fundamentals right and you’ll be in the strongest position to establish yourself as a full-time trader. 

Hardware – You need at least a mid-range computer and an internet connection. Any hardware or internet crashes could cost you dearly. Many suggest having two monitors up and running, just in case of emergencies. Broker – Make sure you pick a Forex & CFD Broker that suits your needs. They need to offer competitive prices, reliable customer support, and an easy-to-navigate platform.Strategy – You need a trading strategy that suits your trading style. It needs to rely on chart patterns and technical indicators

Trading Office 

Location is an important topic. Will you have an office at home or try and trade in a variety of locations on a laptop? You may have seen the images of a lone trader sitting behind 6 or even 9 monitors keeping track of all sorts of data – but is it necessary? One alternative to trying to dedicate some space at home to trading is to use rented desk space. 

There is also a service that takes things a step further. Like-minded full-time traders can exchange ideas and strategies face-to-face. The concept is booming in both London and New York and may make CFD trading or stock trading much more viable for those concerned about market data, solitude, and office space.  

In the beginning, start with a laptop or even with a tablet or large-display smartphone. 

Capital 

One of the first questions out of an aspiring full-time trader's lips is ‘How much capital do you need?’ The one requirement of trading from home for a living is capital. Roll back the dice a few years and you needed a minimum of $25,000 to start as a full-time trader. Not only that, but you always had to maintain at least that amount in your account. 

These tough regulations meant for the majority of people, trading for a living was simply not financially feasible. However, the globalization of the financial industry has allowed numerous trading platforms to develop all around the world. Today then you can start trading with as little as $1,000 in your account

Education 

If you want the best chances of succeeding as a full-time trader you need to utilize a wide range of resources. Fortunately, you can now find free, educational tools with just a few clicks of the mouse. Some of the most effective resources worth considering are: 

  • Books, e-books, and audiobooks 
  • Trading courses 
  • Financial websites 
  • Guides and tutorials 
  • Trading forums  
  • Podcasts, webinars, seminars 

You’ll find advice from experienced traders on forums, blogs, and chatrooms. You’ll benefit from detailed strategy examples from books, PDFs, and tutorial videos. If you’re looking for specific guidance on how to start as a full-time trader, consider our educational materials available in CAPEX Academy. Also, set up a demo account for risk-free practice. 

Risk Management 

If you’re looking at how to become a successful trader, one of the essential components is how you manage risk. As Larry Hite rightly asserted, “Throughout my financial career, I have continually witnessed examples of other people that I have known being ruined by a failure to respect risk. If you don’t take a hard look at risk, it will take you.” 

You need a system that ensures you have enough to make moves, whilst retaining enough capital that you don’t have to go back to the day job. 

A good system revolves around stop-losses, take-profits, and risk-reward ratios. These allow you to plan ahead and prevent heightened emotions from taking control of decisions. 

  • Stop-loss: this is simply the price at which you will sell a stock and take the loss. It will eradicate you, holding on in hope that it will come back. 
  • Take-profit: this is the point at which you will sell a security and take the profit. This will help you retain that profit, by enabling you to sell before a period of consolidation kicks in. 
  • Risk-reward: this tells you how much risk you are taking for how much potential reward. Successful traders look for the highest potential upside with the lowest potential downside. If an investment can bring the same yield as another, but with less risk, it may be a better bet. 

Psychology 

If you’re a full-time trader, consistent and stable profits are the goal, which will require a consistently disciplined mind. As Victor Sperandeo highlighted, “The key to success is emotional discipline. If intelligence were the key, there would be a lot more people making money trading.” 

It may sound straightforward now, but when you’ve got $2,500 on the line and you’ve been staring intently and tensely at the screen for the last six hours, well keeping fear at bay isn’t so easy. An effective way to limit your emotional liability is to employ as much technical help as possible. 

Keeping your emotions in check will take practice, a lot of mistakes, and then even more mistakes. However, a neat trick that helps many traders is to focus on the trade, not the money. Take it from experienced trader Alexander Elder, “The goal of a successful trader is to make the best trades. Money is secondary.” 

Summary 

  • A career as a full-time forex trader, day trader, stock trader, or CFD trader can be lucrative, flexible, and highly engaging. 
  • There is a steep learning curve and traders face high risks, leverage, and volatility 
  • Perseverance, continuous learning, efficient capital management techniques, the ability to take risks, and a robust trading plan are needed to become a successful trader.  

   

Free resources 

Before you start investing and trading, you should consider using the educational resources we offer like CAPEX Academy or a demo trading account. CAPEX Academy has lots of free trading courses for you to choose from, and they all tackle a different financial concept or process – like the basics of analyses – to help you become a better trader or make more informed investment decisions. 

Our demo account is a suitable place for you to learn more about leveraged trading, and you’ll be able to get an intimate understanding of how trading and investing work – as well as what it’s like to trade with leverage – before risking real capital. For this reason, a demo account with us is a great tool for investors who are looking to make a transition to leveraged trading. 

FAQs about Becoming a Trader

This information prepared by capex.com/za is not an offer or a solicitation for the purpose of purchase or sale of any financial products referred to herein or to enter into any legal relations, nor an advice or a recommendation with respect to such financial products.This information is prepared for general circulation. It does not regard to the specific investment objectives, financial situation or the particular needs of any recipient.You should independently evaluate each financial product and consider the suitability of such a financial product, by taking into account your specific investment objectives, financial situation, or particular needs, and by consulting an independent financial adviser as needed, before dealing in any financial products mentioned in this document.This information may not be published, circulated, reproduced, or distributed in whole or in part to any other person without the Company’s prior written consent.
Past performance is not always indicative of likely or future performance. Any views or opinions presented are solely those of the author and do not necessarily represent those of capex.com/zaJME Financial Services (Pty) Ltd trading as CAPEX.COM/ZA acts as intermediary between the investor and Magnasale Trading Ltd, the counterparty to the contract for difference purchased by the Investor via CAPEX.COM/ZA, authorised & regulated by the Cyprus Securities and Exchange Commission with license number 264/15.  Magnasale Trading Ltd is the principal to the CFD purchased by investors.

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Cristian Cochintu
Cristian Cochintu
Financial Writer

Cristian Cochintu writes about trading and investing for CAPEX.com. Cristian has more than 15 years of brokerage, freelance, and in-house experience writing for financial institutions and coaching financial writers.