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Being a full-time trader does not necessarily mean that you need to work every day in a typical 9 to 5 job.
It simply means the total trading profits over a fixed period, let’s say, a year equates to a much higher amount of wealth creation than expected.
One should be capable of taking risks as they are interlinked with rewards. Your appetite and tolerance for risk should be ascertained before you become a full-time trader.
Trading is about creating a lifestyle to create maximum wealth and to get the best returns on investments. Before becoming a full-time trader, one must be ready with the following:
5 Things To Consider Before Taking Up Full-Time Trading
The final decision of becoming a full-time trader depends on various factors such as your appetite for risk, trading experience, and comfort level in using technology.
If you’re not sure how you feel about a full-time career in trading, no worries. We deep dive into 5 critical factors that’ll help you out.
1. Treat Trading Like A Business And Protect Your Trading Capital
Investors should not make the mistake of treating trading like a hobby or a game of poker. Trading should be taken seriously as a business with realistic expectations.
One must pay attention to the intricacies of the trading market before taking the plunge as a full-time trader. It has business components like profits, taxes, losses, expenses, risks, and stress.
Rather than considering it as a threat, it should be an opportunity to understand the risk, market trends and volatility, and how it can be managed well.
One must stringently protect his capital by not taking unnecessary risks and doing everything he can to convert his trading business into a profitable venture.
There won’t always be a 100% success rate – but with a good risk management plan, you can discover a positive streak.
It is recommended to allocate a majority of capital to a medium-to-long-term portfolio. Only 10 per cent should be committed to short-term trading to create cash flow.
Build a corpus and invest it effectively and smartly taking appropriate and calculated risks. Trading short term with huge risks is amateurish and should be avoided.
2. Use Technology To Your Advantage
Using upgraded technology can be enticing and rewarding. The right software can help you chart platforms, back-test an idea, research historical data, get market updates, and monitor real-time trading.
Essentially, it can enhance your trading performance by leaps and bounds.
A full-time trader must be well equipped with prerequisites like reliable machinery, huge space on the system, unwavering internet connectivity, reliable sources of trading information, and a constant trading platform.
Using relevant software like an algo trading api can allow the investor to leverage the power of an effective algorithmic execution platform and enable interaction with the market.
3. Become A Student Of The Markets
Trading should be considered as another stream of education. Each day brings you the latest modules of learning, and it’s an ongoing lifetime process.
Experience in trading is of paramount importance, whether it is in commodities or equities. It’s highly recommended to understand the gist of it by starting as a part-time trader.
Being bullish or bearish is simple, but studying the markets when they are volatile and uncertain requires a lot of expertise and experience.
It is critical to focus and observe nuances and instinct, study the economic reports, comprehend trends and market changes, keep oneself updated on politics, news, economies – they all have an impact on trading.
It’s crucial to keep a tab on what and how much is expendable. Investing assets and values which are allocated to another purpose and losing it through trading can be traumatic and life-threatening.
Before a smooth transition to trading full time, one must try trading working part-time. This will prepare the investor better, building the right psychology and a steady income stream.
4. Always Use A Stop Loss
A stop loss is a determined risk that a trader can afford and is willing to take in each trade. It limits his exposure during a trade, and following the same can be assured for the investor.
Even if it ends up as a loss, you will be prepared for it. One must be unemotional and business-like and should recognize the right time to pull out.
Traders must know if their trading account can handle large transactions. They must realize how much should be taken out from the account (ideally it should be minimal) and how much can be reinvested.
Your motivation and objective should be clear before getting into full-time trading with realistic expectations. You need to comprehend and critically analyze terms like brokerage, margin money, paper trading, etc.
The right time to interpret market trends and tendencies could be right before closing and right after opening. As a trader, one must be aware of the best timing that suits him the most and schedules his time accordingly.
You must be ready to invest yourself psychologically and financially into trading. Naturally, you will run into some bad days – a strategy that can convert them into profitable opportunities surely has an edge.
As a full-time trader, you must be equipped with the tact of dealing with losses and failed expectations.
5. Develop A Methodology Based On Facts
The market is unique, constant, and frivolous. One must adjust to the transforming patterns, movements, and oddities of the trading market.
Facts should be the inspiration behind creating a trading plan. Gather, correlate, assess, and implement the right information that is available through various sources of technology and apply it to trading.
Productive and profitable trading depends on fact-driven study and research. Creating an investment strategy based on data will help in achieving goals each day.
It is fundamental to rely on techniques like trading bots that can calculate algorithms to identify tendencies and sift through relevant information to focus on the bigger picture of trading.
Losing and winning will go hand in hand, and one should take losses in stride too. Setting realistic goals will set the investor up for success in trading.
Before stepping into the trading market as a full-time trader, one must follow certain rules and work on them to establish a viable trading business.
Trading is all about diligence, and traders should possess the patience and discipline to enhance their odds of success in trading, which is a very competitive arena.