Sure, there are many who think they are ready to join the ranks of advanced traders. They’ve already picked out a second home and are planning their next travel adventure. But, a fewer number are willing to put in the mental focus and sweat equity needed to become a consistent winning trader.
What does it take? What are a few essentials to advancing up the ranks in trading? A few leaders and educators in the field share their ideas.
According to faculty at the Corporate Finance Institute (CFI) in Vancouver, one of the prerequisites of becoming a master trader is an adequate education in fundamental economics, financial markets, and technical analysis.
The ability to do quality research and solid market analysis is fundamental to trading success, says CFI. “Master traders develop their skills in being able to thoroughly research all information relevant to the securities they trade – and then, more importantly, being able to accurately determine the likely impact of that information on a particular market.”
Another essential trait is control.
A trader needs to control their emotions and stick to a trading plan and strategy. This is especially important in managing risk by using stop losses or taking profits at set points. Many strategies are designed so the trader loses a little in bad trades and systematically gains more on good trades. When traders start to get emotional about their trades, good or bad, strategy goes out the window.
Matt Choi is a Chartered Market Technician (CMT) in Toronto and is the founder of Certus Trading, a trading education company that helps members become consistent and profitable traders. Matt Choi stresses the value of recognizing patterns and seasonality, which is simply a period of time when an asset (i.e., stock) tends to move in the same direction every year.
“If XYZ stock moved up from November 2 to November 22 over 17 of the past 20 years, the assumption is that it is also likely to move up this year as well,” Choi explains.
He also says successful traders can admit when they are wrong: “There is no certainty in the market. There is no holy grail. There are so many participants in the market that things can change on the dime.”
The editors at Tradeciety note that a professional trader “is not the one who has more trading screens, better equipment or better indicators. A professional trader is defined by how he approaches his trading mentally and how he manages his trading routine day to day.”
One mindset they suggest you adopt is confidence—no matter what: “For the professional trader, winning and losing streaks don’t matter. They are inevitable and will happen over and over again. A professional trader knows that over the long term, his trading strategy will make him money, no matter what. A professional trader sticks to his rules and never loses his mind.”