The common misconception amongst regular people is that becoming a trader is easy. All you need is to open an account with a leading brokerage and start trading your assets of choice. In reality, things aren’t so easy especially if you want to become a good trader, who makes a fulltime living off the profits made on the market. Not only does it require a lot of effort but many missteps to learn. So, the question is what do you have to do to become a good trader?
IQ Options which is one of the leading online brokerages for a variety of assets, knows a lot about trading and their advice to become successful is to learn. That same advice is echoed by The Market Wizards’ author Jack Schwager, who says that a trader is someone who isn’t into a particular asset for a long time. A trader goes init for the short term, makes a profit and hops on to another asset.
What Schwager is alluding to is that traders will trade both when markets are bearish and bullish. Also, traders change their position often compared to someone who is a long-term investor. A good instance of a long-term investor is Warren Buffet. So, traders need to continue making good decisions unlike an investor who can say:
I’ll put a third of my capital in equities, then a third in bonds and the other half into cryptocurrencies, and hold that for the next decade.
Traders don’t do this!
The big mistake many novice traders make is thinking that there is one winning strategy used by seasoned traders. When in fact that’s not the case. No one strategy works all the time. Even if there was a strategy theoretically speaking, if everyone was using that strategy, do you think it will continue to work?
So, the question is what trading strategy should be used? Every trader is different and so the answer will vary. It depends on your personality, your experience as a trader and trading style. Jim Rogers for instance, relies heavily on fundamental analysis. Though other traders like Martin Schwartz will focus on technical analysis.
The choice of what strategy you use will also depend on what assets you are looking to trade. Do you want to trade indices, stocks, currencies, or crypto? Each one is traded differently. You also need to factor in long-term vs. Short term.
It is up to you to find a strategy that works best. It is, after all, a significant part of becoming a profitable trader.
Once a strategy has been fleshed out, the next step is risk management, which is the second most important thing for any day trader. Sure, a brilliant trading strategy will make you money but it isn’t complete if you want to trade regularly. Risk management ensures that at times when you’re not making money, those losing trades aren’t blowing away your capital. So, it isn’t hard to see just how important risk management is for traders. Not to mention self-discipline helps to prevent impulsive decisions.
The final on your list to becoming a successful day trader is flexibility. Global markets don’t have a single pattern or trend, which means that you want to adapt and be as flexible as possible. That means you’ll be bullish one minute and then pivot to becoming bearish the next. You will want to change your mind as the situation changes and that means not using a single strategy that is outdated for that moment. That is a quality a winning trader will need to have.
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