How To Become a Professional Trader (With Salary and Job Outlook)
Some people may engage in stock trading as a hobby, while other people view the practice as a full-time career. There are a variety of training methods that can produce consistent and profitable results and can turn an amateur trader into a professional. Determining what techniques are most successful in the market may help you become an expert in the field. In this article, we discuss what a professional trader is, how to become one and the salary and job outlook for the position.
What is a professional trader?
A professional trader is a person who works in finance and engaged in investing as a business or in a full-time role rather than occasionally or as a hobby. They may work for themselves, at a trading company, at a wealth management firm or as a freelance trader for individual clients. The typical job duties in each of these environments can be similar, but the education and experience requirements to get them varies. Professional traders can have other titles, including:
Day trader: A professional trader who opens and closes their positions at the start and end of trading each day.
Swing trader: A professional trader who works positions over multiple days, hoping to turn a profit from long-term market fluctuations.
What does a professional trader do?
A professional trader buys and sells investment products with the goal of making a profit. For example, a trader may purchase a particular stock for two dollars per share and sell it when it's worth five dollars per share to make a profit. Working in this business may involve duties such as analyzing markets, developing strategies, logging and reviewing individual trades and building relationships with other professionals in the industry.
How to become a professional trader
Use these steps to learn how to become a professional trader:
1. Learn the trading basics
Understanding the basics of trading can help you gain entry-level knowledge in the field that you can refer to throughout your entire career. The basics of trading are factual, data-driven and processed-based pieces of information, but they may vary slightly depending on the source. This doesn't mean only one source is correct. Rather, multiple sources can help give you a range for understanding what's currently successful in the field. Trading basics may include:
The amount of capital required to trade effectively
The best markets in which to trade
Best practices for monitoring trade performance
Information about bidding and asking prices
Order types and how to place them
Risk management practices
Consider reading books about trading, looking at reputable trading websites or talking to a successful trader for advice. You can also access training materials and educational resources from the stock exchanges themselves on their websites. Learning these basics can help you decide in which investment products you'd like to trade.
2. Learn the advanced basics
Decide in which products you want to trade. Some options include:
Futures: Financial contracts that require a trader to buy or sell an asset for a specific price at a future date.
Options: Investment contracts that give the trader the right to buy or sell the asset for a specific price by a certain date.
Stocks: Investment that represents an ownership share in a company.
Once you know in which area you'll be working, you can understand the advanced basics of that specialty. This information is more specific than general trading information and may allow you to become an expert in that particular area over time. Similarly to learning the trading basics, you can use books, internet sources and mentors to learn the niche markets of your choice.
3. Develop trading systems and techniques
Working to develop trading techniques and systems may help you discover the most logical and effective ways to make a profit in your market. Unlike the basics, trading strategies may be subjective, so it's important to find a trustworthy source of information. Look for sources that provide charts and examples of how their strategies work over months or years. Note the ones that seem like they could be profitable in your real-world situation.
Finding a professional trader who teaches their strategies to others may be helpful. Some have their own books and websites or host webinars or conferences. Others may offer personal mentoring services you can customize to your individual needs. It's also possible to teach yourself trading methods, but it may take longer than working with already available resources. Consider making an outline for your plan as a visual representation and to take notes about what works well in practice or where you can develop your technique.
4. Gain trading experience
Making trades within a real market may help you make improvements to your theoretical techniques. The goal when putting a new system into practice isn't to win every trade or be perfect, but to be profitable and consistent. By using your strategies to make your first trades, you can test and revise your theories to work as expected over time.
5. Consider paper trading
May trading platforms offer a capability called paper trading. This feature allows you to practice your trade strategy in a true-to-life market environment using pretend money to simulate your gains and losses. Though you won't make a real profit from engaging in paper trading, you can determine which components of your strategy are solid enough to use to make real money trades.
6. Choose a reliable broker
You may attribute some of your trading success to choosing the right broker to facilitate your investments. A brokerage firm is an organization that connects traders to sellers and creates an environment for the deal to take place. Some brokerage firms charge fees or commissions for use of their services. Picking a broker that deals in or even specializes in working with sellers in your niche may help you find and secure better deals.
7. Learn to focus
Professional traders may can focus deeply on the task at hand when buying and selling investments. They may block out distractions in their environment or set up their workstations to be streamlined and allow only the most important information to enter the area. Train yourself how to focus on your tasks by practicing meditation or other focus techniques, taking actions to minimize distractions in your environment or using additional tools like focus apps for your phone or computer.
8. Understand risk management
Risk management is a process of understanding potential threats to an organization, business or situation and creating strategies and contingency plans to avoid them. For professional traders, understanding and using risk management procedures can help determine which markets and moves are best, when to buy and sell and how to predict market trends to stay profitable in the future.
One of the primary risks in trading is how much money you're willing to lose on a single trade. You can determine this through several factors, such as how much an individual account is worth. Understanding what risks you're comfortable taking with your trades may help you feel more confident in your processes and allow you to make smarter decisions with your money.
9. Understand your potential
Similar to risk management understanding the amount of money you can trade and make realistically can be helpful in creating your strategy. The exact figure or projected percentage may be different for each trader and depend on factors such as your markets, the time frame and the amount of your investments.
10. Consider keeping a trading journal
Keeping track of your trades may help you make logical business decisions or adjustments to your strategy. Consider starting a trading journal where you record the metrics of each trade, either digitally or in a paper log. Some of the metrics to use may include:
Date: The date on which you entered the trade
Time: The time frame of the trade
Setup: The factors that triggered your entry into the trade
Market: Information about the market in which you're trading
Lot size: The number of items you purchase within the transaction
Long or short: Whether you expect the item to increase or decrease in value
Tick value: The minimum movement of the price of the investment
Price in: The price you paid per share to enter the trade
Price out: The price sold per share to exit the trade
Stop loss: The price where you'll exit the trade if necessary
Profit and loss: The dollar amount of the profit or loss made from the trade
Initial risk: The dollar amount of the money you're willing to lose on the trade
11. Review your trades
Periodically review your trades to identify patterns of success in your strategy. Look for areas where you're doing well and understand why they're working. See if you can apply those strategies or methods to areas in need of improvement across your portfolio.
12. Consider earning a degree
Though you don't need a college degree to become a professional trader with your own finances, if you choose to become one for a company or if you provide freelance services to clients for commission, consider earning one to increase your credentials. A bachelor's degree in areas such as finance, accounting, business administration or economics may help you learn valuable trading skills like math, logic and problem solving. Most bachelor's degree programs take a minimum of four years to complete.
Salary for a professional trader
On average, traders make $84,805 per year. They also have the opportunity to make up to $25,000 per year on commission. Benefits packages for professional traders can include:
Health savings accounts
Matching gift programs
Unlimited paid time off
Work from home opportunities
Job outlook for a professional trader
According to the Bureau of Labor Statistics, professional traders are part of a category called securities, commodities and financial services sales agents. They expect the industry to grow 4% in the next 10 years, which is as fast as average compared to other fields in the United States.
Skills for a professional trader
Professional traders use both technical and interpersonal skills to complete their job duties successfully. Some of these abilities can include:
Work environment for a professional trader
Professional traders may have varied work environments depending on if they're self-employed or work for a company. Those who work for an organization may work in an office building with traditional hours and standard paid vacation and sick leave. Sometimes, freelance or company-hired traders may hold virtual meetings or travel to do business with clients.
Those who are self-employed can work from home or anywhere that has a reliable internet connection. They may work extended hours on flexible schedules to fit their personal lifestyles. Professional traders often spend a lot of time sitting down and looking at computer, phone, tablet and television screens.