At one point in time, only an exclusive set of MBA graduates working for institutional brokerages and financial companies took part in stock trading. Over the next several decades, trading became highly democratized thanks to electronic communication networks (ECNs) that handle most of the trades online. In 2020, when people are encouraging alternative, different career options, you can seriously consider entering stock trading as a profession.
How to Launch Your Trading Career?
The rest of the article addresses those who want to start a career in stockbroking and trading without being part of an institutional brokerage firm, i.e., trade independently or on a contract basis.
1. Starting Capital
The biggest advantage of working with a trading firm is that it takes care of your capital requirements. If you trade independently, you would need some help in gathering your initial finances.
Most trading options require little capital to begin. For example, you can open an account in the forex market with as low as $100, whereas if you want to become a pattern day trader, you need a margin account with a minimum balance of $25,000.
2. Proprietary Trading Firms
What if you could work along with other traders on a trading floor instead of selling and buying stocks online from home? Thanks to their training programs and low-fee structures, proprietary trading companies have become a lucrative option for aspiring traders. A proprietary firm is one that invests for direct market gain rather than earning commissions from clients.
Traders who are hired by such firms are typically on contracts and not full-time employees. They do not receive a regular income, but they take a share of the company’s profits. The trader is the investor, but the firm provides the capital.
3. Educating Yourself
If you do not have a formal education in trading or stock markets, you should put in extra effort to make sure you understand as much as you can about the business. There are books, online resources, and full-fledged courses to educate you on stock trading, but more than all of that, you need practice.
Before you decide to quit your day job to become a full-time trader, sign up for paper trading accounts online. You get free stocks and virtual money to experience the stock market but without losing any money. When you are confident enough after simulating an ample number of trading scenarios, you are start trading in the actual market.
4. Prepare Yourself Mentally and Emotionally
Trading is never simple, especially in your early days. You should be mentally and emotionally prepared to face some losses initially when you are new to the working of the market. Bear in mind that you will be on a level platform with some of the most fierce traders who are not necessarily going to show mercy on rookie traders.
The critical thing is to continue to learn and trade, and soon enough, you will start making profits. Daily fluctuations in your income can impact you psychologically, but you should realize that every trader or investor who made it big went through the same phase as you, but persevered.
5. Trading is Not Gambling
Unlike the common misconception among many non-traders, stock trading is not a form of gambling. If you gamble your money away, the intricacy of the financial system is such that your flaw can crash the entire network and harm others. With the right amount of research, practice, and experience, you can develop strategies to ensure consistent profits.
Most professional traders develop their own strategies based on their experience. In your early days, you can search and read up about various trading strategies online and try them out in virtual stock markets, but ensure you understand all the implications and conditions of the procedure. To start devising your tactics, try them out on two or three stocks first and see if they work out, before applying the same principle to hundreds of securities.
6. Monitor Your Progress
Whether you are a novice independent trader selling securities from your living room or an institutional broker in a corporate firm, maintaining a journal specifically for trading is highly recommended. Make a list of your daily trades (total investment, number of shares traded), missed chances, any other mistakes you made, and what you learned from your activities that day. These notes will help you keep track of your progress and improve with time.
In most online trading platforms today, there is an option to make notes on the platform, next to your charts or data tables. You can also get automatically generated reports and statistics about your performance on a weekly or monthly basis. Remember, making mistakes in trading is nothing to be ashamed of if you learn from them.
7. I Don’t Want to Leave My Day Job
For several reasons – generous income, quality of work, relationships with colleagues – some of you may not want to leave your current profession to shift to trading. If you choose to become a part-time trader, you have several other restrictions in place, the most important of which is that you can devote only a short time for trading.
However, it is not a lost cause entirely: trading can be an excellent course of additional income. Most of your preparation will be the same as that of an aspiring full-time trader, but you should plan for a few more things:
- How many hours of each day are you going to trade, and when?
- Can you trade well and not compromise on your regular job?
- Have you set aside enough income from your day job to compensate for the losses made in trading (if any)?
A Chosen Few
Ultimately, only a few traders rise to the top in the business and become the next Warren Buffett. This 10% or so of all the traders put in the required hard work, perseverance, develop skill, and carry out extensive research to master the stock trading business.
There is nothing wrong with leaving your current job if you genuinely feel that you have a knack for trading. With enough resources online and these tips to keep in mind, you are already on your way to becoming a full-time trader!