How to Become a Professional Trader

Take Your Trading to the Next Level

BY 

ADAM MILTON
 
REVIEWED BY 
GORDON SCOTT
 
Updated August 24, 2020

To become a professional trader, you must learn trading basics and advanced basics.
Once these are mastered, you can learn proven strategies and gain experience in
implementing them. 

Also, it's important to be realistic about this profession. There is no perfect method of
trading that consistently produces only winning results. However, if you practice learning
to discriminate accurate information from that which is incorrect or misleading, you can
spend most of your time focusing on information that will make you a more efficient and
profitable trader.

Trading Basics
One of the most efficient methods for learning to trade is learning market and trading
basics. A solid understanding of the basics provides the foundation that will support
your entire career. This first level of knowledge is required before more advanced
trading information can be successfully implemented.

Books on trading found at your local bookstore or reputable trading websites can
provide you with all the trading basics you need at a relatively low cost or no cost. The
basics include all of the factual information about trading, such as:

 What markets to trade

 How prices move (bid and ask prices)
  Order types and how to place them
 Risk management
 Trading hours
 How to monitor trading performance
 How much capital is required to trade efficiently

Trading basics are typically factual in nature, and there isn't much subjectivity. One
information source may say to start currency or forex trading with at least $500, while
another source may say to start with at least $1,000. One source isn't necessarily right
or wrong. The information from multiple sources is indicating that you should definitely
start with at least $500 and ideally with $1,000 or more. 

The exchanges themselves provide traders with most of the market basics. For
example, the New York Stock Exchange and NASDAQ provide educational resources
on how the stock market operates through the main menus on their websites. The
Chicago Mercantile Exchange does this for futures and the Chicago Board Options
Exchange does the same for those wanting to learn about options trading. 

Learning the Advanced Basics

Learning trading basics gives new traders an opportunity to learn about the various
markets and the one in which they want to trade. 

When learning the basics, traders determine if they want to trade stocks, futures,
options or forex trading. Upon making this choice, they can then delve deeper into the
trading basics specific to that market.

For example, a new options trader needs to learn about options Greeks, which help
determine the price of an option. Those interested in futures trading need to learn about
ticks, points, and the various specifications for each futures contract they may want to
trade. Stock traders need to learn how to short sell, how dividends work, and the
differences between pre-market trading and trading during normal hours. Forex traders
need to learn about pip values and daily rollover rates.
Books on trading and instructional websites can offer information and lessons on these
and other more advanced basics topics.

Trading Systems and Techniques

The next step is to learn strategies that will produce a profit in whatever market you
want to trade. Such strategies are subjective, which means the source of the
information matters. Free resources may provide generic strategies that worked at one
time, but no longer work.

Finding viable strategies requires much more research and verification than learning
trading basics. When learning strategies, review charts and look for examples of the
strategy at work. If it seems it could be profitable on your own small real-world test, then
continue investing some time in the method. If not, leave the method alone.

The best method of learning a trading technique is to find a professional trader that will
teach you their trading technique. Some professional traders offer websites or books
highlighting their methods. They may also provide personal mentoring, which is the
most direct approach to learning how to trade.

It is also possible to learn a discretionary trading technique without any form of

instruction. Self-learning is fine, but it may take longer to come up with a profitable
system when compared to learning a system that is already profitable.

Many professional traders develop their own trading methods by continually studying
charts, noticing certain patterns or tendencies, and then developing a system that
exploits those tendencies. This may take months or even years of testing before the
trader finds a viable method that produces profits consistently. 

Gain Some Trading Experience

Practice doesn't make perfect, but in trading at least, perfect practice makes
improvements. You'll never achieve perfect results because not all trades are won, even
by professional traders. And that is okay.
You don't need to win every trade to produce a good living. What is required, though, is
implementing your method nearly perfectly. This is within your control, while results are
not. If you do the right thing, favorable results are more likely. Doing the right thing is
following the methods you have learned and opted to use. 

Use Paper Trading for Training

When first learning a trading method it may seem very easy. However, once you begin
to implement it, it may be harder in actuality than you had anticipated. Most traders quit
at this stage and seek out another strategy. Unfortunately, these types of people rarely
become successful. Even a simple trading strategy often requires at least several
months of hands-on experience before the method starts producing profitable results. 

Many trading platforms offer a paper trading capability, which is trading with "fake"
money instead of your own, real dollars. As you develop trading strategies, you can try
them out with paper money and real-time market movements. Some platforms also offer
historical market data, and many professionals use this to back-test their trading
strategies to test whether the trades would work under various known market
conditions.

As a trader progresses and gains more experience, they will likely find ways to improve
their strategies or notice other market tendencies that can be exploited if another
strategy is formulated. A successful trader may also find that a strategy that once
worked is no longer performing well. In this way, a trader is always learning from their
experiences and trying to find better ways of performing their job. They are simply
adapting to changes in the market that may make current strategies obsolete but
provides an opportunity for a new strategy to be deployed. 

The Balance does not provide tax, investment, or financial services and advice. The
information is being presented without consideration of the investment objectives, risk
tolerance or financial circumstances of any specific investor and might not be suitable
for all investors. Past performance is not indicative of future results. Investing involves
risk including the possible loss of principal.