There are many routes to becoming a professional trader, as well as many skills that a candidate needs to excel in a high-stress, highly-competitive field. When financial firms recruit for trading positions, they tend to look for people with degrees in math, engineering, and hard sciences rather than simply those with finance backgrounds.
There are also different trading jobs, some of which require customer-facing communication skills as much as chart savvy. That said, we’ll look at some of the skills that are required of all traders.
Key Takeaways
- Becoming a trader requires a background in math, engineering, or hard science, rather than just finance or business.
- Traders need research and analytical skills to monitor broad economic factors and day-to-day chart patterns that impact financial markets.
- The ability to focus and concentrate, particularly in a chaotic, fast-moving environment, is an underappreciated but crucial skill for traders.
- Self-control is crucial, as well as the ability to regulate emotions despite developments that could be upsetting.
- Accurate record-keeping is important for trader accountability and for learning and improving.
Analytical Skill
One skill every trader needs is the ability to analyze data quickly. There is a lot of math involved in trading, but it is represented through charts with indicators and patterns fromtechnical analysis. Consequently, traders need to develop their analytical skills so they can recognize trends and trends in the charts.
Research
Traders need to have a healthy thirst for information and a desire to find all the relevant data that impacts the securities they trade. Many traders create calendars of economic releases and set announcements that have measurable effects on the financial markets. By being on top of these information sources, traders are able to react to new information as the market is still digesting it.
Focus
Focus is a skill and it increases the more traders exercise it. Because there is so much financial information out there, traders need to be able to hone in on the important, actionable data that will affect their trades.
Some traders also focus on the types of securities they trade so they can deepen their understanding of a specific sector, industry or currency to the point where it becomes a competitive advantage against less specialized traders.
Most of the required skills are learned, and with a bit of effort, traders can improve their analytical capacity, research abilities, focus, control and record keeping.
Control
Hand in hand with focus is control and, specifically, self-control. A trader needs to be able 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.
Record Keeping
One of the most important keys to trading is record keeping. If a trader records the results of his or her trades diligently, then improving is simply a matter of testing and tweaking strategies to find a successful one. It is hard to show real progress if you aren't keeping accurate records.
FAQs
Key skills for traders
- Confidence.
- The ability to analyse data and make decisions quickly.
- Numerical skills.
- IT skills.
- Communication skills.
- An interest in financial markets.
- Analytical skills.
- Interpersonal skills.
The Five-Step Process Behind Every Trade
- Step One: Discovery. Goal: Find potential stocks to trade. ...
- Step Two: Analysis. Goal: Analyze a set-up to determine if there is a trade opportunity. ...
- Step Three: Game Planning. Goal: Plan your trade. ...
- Step Four: Execution. Goal: Trade your plan. ...
- Step Five: Post-Trade Analysis.
6 Character Traits to Develop or Refine Your Day Trading Career
- Discipline.
- Patience.
- Adaptability.
- Mental Strength.
- Let Go.
- Independence.
Being able to quickly and effectively solve problems is an essential skill in the skilled trades. Attention to detail: Skilled trades jobs often require precise measurements and careful attention to detail. Being able to accurately follow instructions and pay close attention to your work will be key to your success.
Is trading a skill or luck? ›
The stock market, like everything else in the world, is all about risk. While it may seem like luck plays a role when you're making money, at some point, it needs to be skill-based.
Is trading a hard skill? ›
First and foremost, trading is a profession based on skill. Like all other skills, trading prowess is something to be acquired through training, coaching, and strong dedication. There are techniques to learn, practice, and master. But simply mastering these techniques will not bring success alone.
What is the key to successful trading? ›
One of the key components of a successful trading strategy is the use of stop-losses, which are predetermined exit points that limit the losses of a trade. Stop-losses help traders cope with market fluctuations and reduce the risk of large losses.
What are the golden rules of trading? ›
Let profits run and cut losses short Stop losses should never be moved away from the market. Be disciplined with yourself, when your stop loss level is touched, get out. If a trade is proving profitable, don't be afraid to track the market.
What is the 3 5 7 rule in trading? ›
What is the 3 5 7 rule in trading? A risk management principle known as the “3-5-7” rule in trading advises diversifying one's financial holdings to reduce risk. The 3% rule states that you should never risk more than 3% of your whole trading capital on a single deal.
How can I be a perfect trader? ›
- 1: Always Use a Trading Plan.
- 2: Treat Trading Like a Business.
- 3: Use Technology.
- 4: Protect Your Trading Capital.
- 5: Study the Markets.
- 6: Risk Only What You Can Afford.
- 7: Develop a Trading Methodology.
- 8: Always Use a Stop Loss.
16 Simple Ways to Become a More Efficient Day Trader
- Scan at Night.
- Wake Up Early and Check Pre-Market Data.
- Keep your Watch Lists Short.
- Use Multiple Watch Lists.
- Limit Your Indicators.
- Create a Positive Environment.
- Avoid Distractions.
- Don't Overthink Your Trades.
9 Highest Paying Trade Jobs
- #1. Construction Manager. There are several methods of getting your first job as a construction manager. ...
- #2. Elevator Mechanic. ...
- #3. Dental Hygienist. ...
- #4. Ultrasonographer. ...
- #5. Boilermaker. ...
- #6. Electrician. ...
- #7. Plumber. ...
- #8. HVAC Technician.
Carpentry is one of the easiest trades to learn. It involves constructing and repairing structures made from wood, such as houses, furniture, and other wooden objects. Carpenters typically use hand tools like saws, hammers, chisels, planes and drills to create their projects.
What's the quickest trade to learn? ›
What is the shortest trade school? Medical assistant programs generally take the least amount of time to complete. Students can finish their training in as little as eight weeks.
What a beginner trader should know? ›
How to start investing in stocks: 9 tips for beginners
- Buy the right investment.
- Avoid individual stocks if you're a beginner.
- Create a diversified portfolio.
- Be prepared for a downturn.
- Try a simulator before investing real money.
- Stay committed to your long-term portfolio.
- Start now.
- Avoid short-term trading.
To become a trader, an individual will need a background in engineering, maths, or hard science, instead of having only business or finance background. Traders will need both research as well as analytical skills to keep track of day-to-day chart patterns and economic factors that have an impact on financial markets.
