Introduction
This article is for those who are interested in trading but have not taken major steps towards it yet.
Are you interested in trading but simply can’t put your head around how to get started? Or have you already started but are struggling to find the right path towards actually becoming a successful trader? If that’s you, then keep reading, because this article is meant for you.
Most people of the younger generation probably have heard the term “trading” or “trader” before. For some, it’s associated with money, profit, for others – prestige, success, while yet for others it may mean numbers, complexity or even greed. Most likely you are reading this article because for you trading means money, success and is at least of some interest to you as a job opportunity. In this article, we are going to raise and help you answer some key questions that will help you form your own path to success as a trader. This piece will be part of a series of articles that will be lengthier and more in-depth. They will aim to address some beginner, intermediate and advanced level topics to help you in your trading. Keep an eye on the “Learn to trade” section for more content like this.
I have split this article into 10 parts, the first 6 each starting with a question, and ending with a discussion/answer. The last 4 will be more practical and give you tips on what you need to do to get started. We will be touching upon topics such as “is trading really for you?”, your mindset, interests, and what you need to be doing to get started in trading.
Part 1: Is trading really for you?
The most important question you will ever ask yourself before you get into something is “is this really for you?”. Because if it’s not, then you will be wasting your time if you go for it. For some, the answer to this question will be a “100 percent YES!” For others, it might be trickier as you might simply not know for sure. Whatever your current answer is, let’s try and figure out for sure.
First, ask yourself, what is the primary reason that you want to be a trader? Be honest with yourself. Is it money? Prestige? Is it because it’s interesting? Do you like solving complex puzzles? Do you enjoy numbers? If you are only interested in trading because you want to be rich and have a prestigious occupation, then you might want to rethink your true intentions. Not to say that you won’t make it, but chances are, you will probably quit it sooner rather than later if you don’t truly enjoy doing it.
I also want to touch upon the fact that trading is a lot about numbers and deep analysis. If you do not enjoy any of those – this career might not be for you. Also, while it does help to have an analytical mindset, if you sucked at math at school but want to be a trader – don’t be discouraged by that, as you can more than make up for it by hard work and dedication.
Finally, successful traders usually have such qualities as patience, a calm mind, discipline, ability to concentrate, etc. If you are really impatient, hot-tempered, this path might not be for you. Or you will need to learn to discipline yourself in the long run if you want to make it work.
Part 2: What is your risk tolerance?
If you have decided that trading is for you, the next question to ask yourself is “what is your risk tolerance”? Does it hurt more to lose money than to gain it? Do losses hurt more in general than you enjoy wins? Or is it the other way around? This is important since it can help decide the kind of instruments you are better suited to trade. Not only that, the kind of style of trading you’re suited for. For instance, if you are very risk averse, it might make sense for you to be a long term index/bond investor. Whereas if you tolerate risk very well, you might be better suited for daily stocks/futures/options trading.
In general, the more risk tolerant you are, the shorter the period you can trade. Also, the more aggressive strategies you can use, and the more risky investments you can choose. Not to say that you can’t trade any of those if you are very risk-averse, but you may simply lose control and not enjoy the rollercoaster ride. That said, for many beginners, you may not know your risk tolerance until you start trading.
Part 3: How much free time do you have?
Another important question you should be asking yourself is “how much free time do I have?”. It’s a very important one because it will dictate your investment strategy. For example, if you have quite a few hours left off of your main responsibilities for trading, then you could easily be trading and watching the markets on a daily basis. However, if you only have an hour at best, then you might be better off investing long term, in an index or a fund.
Part 4: What do you enjoy?
Similar to the question we raised in part 2, this one is about what environment you enjoy in general. For example, if you thrive in chaos, then you might be an event trader. If you enjoy steady gains over a long period of time, then you might consider trading less volatile assets or investing over a medium-long period of time. Or maybe you enjoy a mixture of those things? The answer to this question can help you choose the right path to trading.
Part 5: What are you interested in?
What are you passionate about? Is there something that really interests you in the realm of trading? Maybe you enjoy macroeconomics more than you enjoy the microanalysis of a particular business? In that case, you might consider asset classes that have macro exposure. For instance, bonds, interest rate futures, or even commodities. Or is it the other way around? Then you might be more suited to be a stock trader. Maybe you enjoy complexity more than anything? A possible path could be complex derivatives trading, such as options/swaps or even swaptions. Or if you really have a passion for IT and software development – algorithmic trading. In general, the number of combinations of strategies and instrument is unlimited. While it is beyond the scope of this article to try and address them, you can begin to have an idea of what it is that you want to do, what you enjoy doing and what interests you the most. This will guide you in the process of choosing the right trading path for you.
Part 6: Okay, so where do you start?
The answer to the question “what’s the best place/way to start?” depends on how much you can or want to invest in your own education. Successful traders are not born, they are made. And by made I mean self-made. They generally invest a significant amount of time, effort and even money in their own skills and education, which is the absolute key when it comes to becoming a successful trader. While there are no shortcuts to success, you can definitely improve your learning curve by a lot. One way to do that is to have a mentor or become a member of a trading community. Tradimo offers both of these options.
Part 6.1: Find Tradimo Premium
In case you are ready to invest heavily in your own education, Tradimo offers 1on1 coaching. It’s a very individual service, catered to your specific needs. It’s simply the most effective and the best way to learn to trade. You can contact premium@tradimo.com for more information.
With regards to being a member of a trading community, Tradimo offers a Premium Membership Service which has the following benefits:
- Nanodiplomas – You will get access to more than 70 hours of our exclusive Premium online courses which will help you become a successful trader. (more on Nanodiplomas here)
- Access to our Signal Community – we have recently opened a $100,000 real money trading account. As we use it to take market positions, we share real-time signals and trade ideas that you can then implement in your own portfolio. In June alone we had 8 winning trades, and 1 losing trade, amounting to a $7,549.70 in profit.
- Premium only Webinars – you will get access to exclusive webinars hosted by top coaches.
- Separate discussion boards in English, German and Russian.
You can read more about our Premium Service here.
Other than that, I would not recommend getting a degree in finance/economics just for the sake of learning about similar subjects, as it is extremely expensive, time-consuming, and will not make you a successful trader by itself. You need specific, professional knowledge about trading and how the markets work to be successful. That comes in a form of knowledge, experience, and skillset.
Part 7: Investing in your knowledge
Congratulations, because you are already doing it! Reading articles, books watching quality trading videos, courses, podcasts – all of these will help you broaden your perspective and get more in-depth knowledge about the markets. A good place to start is our article base on the financial markets, or the learn section (which you are currently reading). Try to start following the news and try to think about how it affects different assets, such as stocks, bonds, futures, etc. Say, the Fed has cut interest rates – try to predict how this will affect the markets, and then check what actually happened. Keep track of your track record.
Part 8: Investing in your experience
Experience is probably the most important asset when it comes to trading. You can have the right skill set, the right knowledge base, but with no experience, you will lose money trading. Best solution – simply sign up for a demo trading account, and start trading. Try to see how you feel trading different timeframes, and try to think deeper about the markets – don’t just blindly guess where the price will go, try to base your decision on some kind of knowledge or insight. Don’t be discouraged if you lose virtual money – more than 90% of traders lose money when they start trading.
Another option could be getting a job at a trading firm, investment bank or a hedge fund. This would definitely increase your experience significantly, however, these positions are extremely competitive and hard to get.
Part 9: Investing in your skillset
Most investment banks, hedge funds, and trading companies apply psychometric tests to most entry-level analytical positions. The reason is simply that usually a good analytical skillset is correlated with good job performance. Same goes for trading. For instance, for day traders, one needs to develop a very specific skill set that allows him/her to make sharp, fast, correct decisions under pressure. For longer-term investors, you still need a high analytical skill set to be able to predict where the market will go next. So, a good place to start is to simply begin completing different analytical/IQ/psychometric/numerical tests, which you can simply find online. This will help you increase your skill set.
Part 10: A trading primer
This last section will be a short primer on trading. It can be read while having in mind the “what’s your risk tolerance?”, “what are you interested in?” and “what do you enjoy?” questions.
So, what exactly does trading involve? We have touched upon some of these aspects already, however, I’d like to expand on them a little bit. Different assets, different trading strategies, different investment periods, they all determine the type of qualities needed to be a trader. However, in general, since trading involves risk, you will need to be comfortable with taking it, at least somewhat. Moreover, you will need to make timely decisions, be patient and disciplined and have a general feel for the market. It’s definitely not for the faint-hearted, you will need lots of emotional strength and stability. One can easily get exhausted emotionally after a series of wild swings in the market that you take positions on.
Part 10.1: Fundamental vs Technical analysis
Asset analysis is a key part of being a trader. Generally, you need to be on top of the latest market developments in order to be successful. There are two types of analyses: fundamental, and technical.
Fundamental analysis involves analyzing assets from a value perspective. For example, for stocks – it’s deciding on how much value the stock actually has, or how much it’s actually worth. You will be trying to predict the future earnings of the stock. That involves looking at the business trends and analyzing the financial statements of the company. For bonds – you will be trying to predict where the interest rates are headed. That involves developing a more macroeconomic view and analyzing economic trends such as inflation, employment, GDP, etc.
Technical analysis involves analyzing the historical price movements of a particular asset and basing your trading decisions on that. It involves seeing trends, patterns in price movements, using various technical indicators to determine where the price is headed next. The key difference here is that your primary source of analysis is the price itself, not the fundamentals of a stock or the economy. Most traders use the candlestick chart, as it gives you enough information on how the price behaved in a particular timeframe.
With these different aspects of trading in mind, with some experience, you can begin to see where you fit it in more. Some traders only look at fundamentals, some – only at technicals. However, most use both types of analysis and combine them together. It’s up to you to find out where you fit it, as you consider your strengths, weaknesses, interests, what seems logical and closer to heart.
Conclusion
We have started this article by asking the most basic questions regarding who you are and what you want, enjoy and what interests you. Later we have discussed specific areas that you can start working on to become a successful trader. The key here is the link between the two parts. After you have identified what kind of a profile you have, it’s time to get your hands dirty and delve deeper into actually doing something in order to really answer those key questions in practice. Because in reality, you will never fully know what kind of a trader you want to be unless you actually try something out. So, my final word of advice is, with the little time that you currently have, keeping those few key questions in mind that we have discussed in this article, by doing, try to find out what you enjoy most about markets, and you will be well on your way towards becoming a successful trader, developing a successful trading strategy and making a living out of it.
