There are many routes to becoming a professional trader—and many skills 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. (See Trader Vs. Investment Banker: Which Is Right For You?)
- Becoming a trader requires a background in math, engineering or hard science, rather than just finance or business.
- 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.
- Also crucial, in terms of temperament: self-control, and the ability to regulate emotions despite developments that could be upsetting.
- Accurate record-keeping is important for trader accountability and for learning and improving.
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 from technical analysis. Consequently, traders need to develop their analytical skills so they can recognize trends and trends in the charts.
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 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 in 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.
Skills are learned, and with a bit of effort, traders can improve their analytical capacity, research abilities, focus, control and record keeping.
Hand in hand with focus is control, or 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.
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.