How to Determine if Trading is For You

People are drawn to trading for a variety of reasons but one of the most common reasons is the desire to have an income free of an employer, without leaving home and the development of greater personal freedom. However, it is not all plain sailing; trading for a living can be demanding, especially when you depend on it for your income, to pay the mortgage and keep a roof over your family’s head.

In this article, again, focussed on less experienced traders, we will explore some of the factors that could help you create better trading experiences.

LIFESTYLE

For many reasons, adding trading to your routine will involve significant adjustments to your lifestyle, and possibly the lifestyle of your family. No doubt you have seen advertisements where someone is sitting on a deck chair taking trades, suggesting that a trader’s life is easy and relatively carefree.

However, a trader must spend time reading and learning about trading and trading skills, researching markets, sitting in front of a computer studying charts, planning trades, taking trades, monitoring trades, and reviewing results. Trading certainly takes you away from an employer, and if you are successful, you will enjoy the freedoms that this can provide.

TIME

While traders have considerable freedom, a lot of people are surprised by the amount of time they have to spend to stay up to date with the market. However, this can vary greatly depending on the style of trading you prefer. Day traders will need to be available when the markets are most active, so during the times that the European and US markets are operating whereas those who trade daily charts or longer and hold trades for days and weeks can take more time to plan trades at a time that is better suited to their schedule.

Trading tends to a be a consuming past-time involving reading about strategy, technique, markets, economic and geopolitical data and so on. So, a trader needs to be able to enjoy this process, otherwise it won’t be long before the whole process becomes a chore and it is difficult to maintain focus.

PERSONALITY, ANALYTICAL ABILITY AND TRADING STYLE

Everyone’s personality is different, and our personality can affect virtually everything we do in life. This includes whether an individual is well suited to trading. For example, some people find risk-taking challenging and uncomfortable. Trading is a risky endeavour, and each trade is speculative; people who are risk averse will find trading difficult activity to engage in.

Alternately, if someone enjoys a challenge, analysing details that can never be exactly pinned down, and is comfortable with risk, that person may be well suited to trading. However, the only way to really know is to try trading, and bear in mind that demo trading makes different psychological demands than trading with real money, and trading for an income makes different demands to trading as a side activity.

There are many ways of trading, focussing on different speeds, using different information, and all requiring different skills. Faster trading will be better suited to someone who can make quick decisions under pressure, without a need for a lot of analysis and confirmation. On the other hand, an individual who prefers to analyse and make decisions and walk away will be better suited to a slower approach to trading, perhaps using a daily swing trading technique.

While you are learning to trade, expose yourself to a wide range of trading styles and techniques including trading at different speeds and different risk levels.  As this is occurring, consider how comfortable the different approaches to trading affect the way you feel and take note of it. In time this might affect the type of trading that you ultimately do.

DEALING WITH DOUBTERS

Can you reword that sentence to talk more about dealing with doubters instead of rapid wealth and the bit about the scam.

If you find yourself in a situation where you want to trade, perhaps having already unsuccessfully tried it before, but also experience negativity from those around you, then you will need to find a solution.

The solutions will be different for different people, but the following suggestions might help:

1. Gain the understanding of your family by explaining that you would like to pursue trading as an interest or, if you like, a hobby. This way they will not be concerned that you and veering off your life course. Instead, it might be thought of as a keen interest like any other keen interest, which is typically good for someone.
2. Ensure your expectations of outcome are not inflated. Instead, set realistic expectations given the time and resources you can allocate to trading, as part of your trading plan.
3. Even if, in your own mind you hope you will be able to change your occupation, give up your job, or have more free time, it is better to not overstate these ideas to those around you. The ideas will sound unrealistic and increase the questions of doubt in those around you.
4. Be honest with yourself about the harsher realities of undertaking an education in trading. Specifically, that a large proportion of people fail to become professional traders, that it will take a lot of work over a long period to become competent and develop the necessary knowledge and skills to become a more confident trader.
5. Set reasonable targets for expenditure in the same way you might for a keen interest and don’t overspend.

SHOULD I, OR SHOULDN’T I?

Whether you decide to trade is a decision only you can make. If you are keen, give it a go but have realistic expectations. Understand the importance of taking into account your circumstances and the amount of time and effort it will take to establish a trading career.

Analysis written by Alistair Schultz, Chief Market Analyst.

This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.