Should you consider a career in financial trading? Trading is an exciting field. Many people are looking for a career in trading because it offers a way to financial freedom. But it is not easy to become a profitable trader in the long term. For doing so, we will analyze the trading career and its specifics in this article. After reading it, you should have a general idea about trading and if you want to start a career as a full-time day trader.
Trading is a profession, and like any other profession, it requires extensive knowledge of the markets and lots of practice to become successful. Many already successful people in their respective careers think that trading is easy, and they can get rich quickly because they feel they are smart enough to do so. But this is not always the case. Trading consists of two main things, analyzing markets using fundamental and technical analysis and then making trading decisions. It involves comprehensive knowledge of macroeconomics, financials, and sometimes the ability to analyze a company’s financial statements. This is not an easy task and takes some time to learn and become proficient. After this, it is important to conduct a thorough technical analysis with various indicators and statistical tools. Add to this the need to know the trading platform to conduct trading and technical analysis activities, and you have an idea of what you are getting yourself into. Let’s divide the necessary knowledge for a successful trading career into three main categories.
Necessary Knowledge to Start Trading Career
The first question you should ask is which market you want to trade in. There are many different asset classes and markets like Forex, stocks, cryptos, commodities, futures, etc. Forex is probably one of the most popular markets. You have to have a general idea of how markets operate, who are participants, and what are the important macroeconomic factors that affect certain asset prices.
Three must-know aspects of trading
- Fundamental analysis
- Technical analysis
- Trading strategy
After understanding these three, it is easier to plan the next steps.
It takes an extensive knowledge of macroeconomics, financials, and financial markets to conduct a proper analysis of the preferred trading assets like stocks, Forex currency pairs, cryptocurrencies, etc. you should learn about economics and macroeconomic indicators. Fundamental analysis is focused on relatively long-term when compared to technical analysis, which focuses mostly on short-term analysis of the price movements. After fundamental analysis, traders should have a general understanding of what to expect from certain assets in the near future. Will US Fed’s interest rate hikes affect EUR USD negatively, or will it further accelerate the currently ongoing trend? Answering these questions requires understanding how each of the macroeconomic indicators affects the USD. Major economic events will affect prices greatly, so watch for them very carefully.
After monitoring news and other macroeconomic indicators, it is time to get to charts and further analyze current price action. Sometimes fundamentals do not affect the current trend, and sometimes they further strengthen the move in a certain direction. So, technical analysis will decide if we want to open a trade in a certain direction. For technical analysis, we will need to have a platform that provides price charts for various assets and tools to analyze their movement. MetaTrader 4, 5, and Tradingview are popular trading platforms.
Indicators are mathematical algorithms used when analyzing Forex or FX pairs. The most popular FX trading indicators listed and explained here will be helpful for beginners. Indicators like moving averages, stochastic, etc. will help make sense of price movements and make a decision about buying or selling a trading instrument. A trading instrument is any asset traded like currency pairs, stocks, commodities, etc.
In order to have an outline of general rules when you trade and what prerequisites it takes to open a trade, a trading strategy comes in aid. It consists of rules that have to be followed strictly in order to consistently make profits in the long term. Long-term survival is the most important aspect of the trading business. A good trading strategy will address trading setups, risk management, trading psychology, and entry and exit strategies. Trading setups are certain price action tendencies that must be described in detail in a trading strategy. A trading strategy is like a flight checklist, it outlines all the necessary steps that have to be taken before the flight. Trading strategy rules should be written down and printed. It is a good idea to always check the rules of your trading strategy before opening any trade.
Summing it all up
In order to become a successful trader, you need to know fundamentals that consist of macroeconomics, financials, and other economic analysis. After fundamentals, it is necessary to conduct technical analysis with indicators and other statistical and algorithmic techniques. Make sure to describe your trading approach from opening a trade to closing them, and strictly follow these rules to be consistent and disciplined.