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 may require a background in math, engineering, or hard science, rather than just finance or business, depending on the type of trading.
- 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
Examples of trader skills
- Numeracy skills. Numeracy skills refer to your ability to use mathematics to solve real-world problems. ...
- Teamwork skills. ...
- Communication skills. ...
- Interpersonal skills. ...
- Integrity. ...
- Independent thinking skills. ...
- Ability to work under pressure. ...
- Analytical skills.
What is the 3 5 7 rule in trading? ›
The 3 5 7 rule works on a simple principle: never risk more than 3% of your trading capital on any single trade; limit your overall exposure to 5% of your capital on all open trades combined; and ensure your winning trades are at least 7% more profitable than your losing trades.
What are the 6 traits you need to develop as a day trader? ›
- 6 traits you must develop as a day trader. Day trading is the act of quickly buying and selling a group of securities within one day, or even in minutes. ...
- Discipline. ...
- Patience. ...
- Mental strength. ...
- Independence. ...
- Adaptability. ...
- The ability to let go.
What are the golden rules of trading? ›
Key Rules from Iconic Traders
Trade with the trend: Follow the market's direction. Do not trade every day: Only trade when the market conditions are favorable. Follow a trading plan: Stick to your strategy without deviating based on emotions. Never average down: Avoid adding to a losing position.
What is a trade skill? ›
What is a Skilled Trade? Skilled trades are occupations that require a special skill, knowledge or ability which can be obtained at a college, technical school or through specialized training. Skilled trades provide an alternative to jobs that require four years of college education.
What is 90% rule in trading? ›
According to this rule, 90% of novice traders will experience significant losses within their first 90 days of trading, ultimately wiping out 90% of their initial capital.
What is the 80 20 rule in trading? ›
In investing, the 80-20 rule generally holds that 20% of the holdings in a portfolio are responsible for 80% of the portfolio's growth. On the flip side, 20% of a portfolio's holdings could be responsible for 80% of its losses.
What is No 1 rule of trading? ›
Rule 1: Always Use a Trading Plan
You need a trading plan because it can assist you with making coherent trading decisions and define the boundaries of your optimal trade.
What is the key to successful trading? ›
You should make trades based on your plan if your trading plan relies on technical analysis. The key is to adjust your position size to give yourself enough room to stay within your predetermined stop loss and not risk everything on a single position.
What is the best trader personality? ›
Everyone is different, but certain qualities are common among all successful traders.
- Adaptable: Adjusts to changing circ*mstances and sudden unexpected events. ...
- Responsible: Doesn't blame others for own shortcomings. ...
- Creative Thinking: Sees beyond the obvious. ...
- Self-Confidence: Believes he/she will succeed.
Winning traders are flexible.
They aren't ego-invested in their trades. They are able to always view the market objectively and easily cast aside trade ideas that aren't working. Winning traders do not hesitate to risk money when they see a genuine profit opportunity based on their market analysis and trading strategy.
What is the 123 rule in trading? ›
The 123 bullish pullback pattern is a method of identifying a pullback trade that occurs over 3 swing moves. It is a 5-column pattern. It is a method to identify when the retracement falls below the bullish breakout level and price again starts moving up.
What are the ABC rules in trading? ›
ABCD pattern rules
In the move from A to B, the market should not go beyond either A or B. In the move from B to C, the market should not go beyond either B or C. In the move from C to D, the market should not go beyond either C or D. In a bullish ABCD, point C must be lower than A and D must be lower than B.
Which trading strategy is most profitable? ›
While these strategies can help make cash within a day, it's important not to expect immediate success and to have a risk tolerance to lose all trades.
- Scalping. ...
- Trend Following. ...
- Gap Trading. ...
- Ichimoku Kinko Hyo Indicator Trading. ...
- Breakout Trading. ...
- Range Trading. ...
- News Trading. ...
- Pullback Trading.
What should a beginner trader trade? ›
As a beginner, focus on a maximum of one to two stocks during a session. Tracking and finding prospects is easier with just a few stocks. It's now common to trade fractional shares. That lets you specify smaller dollar amounts that you wish to invest.
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.
What is required for a trader job? ›
Required skills and experience
Proven experience in stock trading, with a track record of successful portfolio management. Strong analytical skills, with proficiency in technical analysis and fundamental analysis. Knowledge of financial instruments, including stocks, bonds, futures, and options.
What are the requirements to be a trader? ›
Requirements and Qualifications
- Bachelor's degree in finance, economics, mathematics, or a similar field.
- Master's degree a plus.
- Series 7 and/or 63 licenses (preferred)
- FINRA registration (preferred)
- Trading experience.
- Analytical skills.