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HOW TO BECOME A TRADER FROM SCRATCH. INTERVIEW WITH A PROFESSIONAL TRADER
The trader profession is extremely attractive and more and more people want to become traders. This is not surprising since professional traders make good money and are masters of their time.
- What a trader is and what it means
- What a trader does
- How to become a trader
- How to study to become a trader
In this unusual article we would present you an interview with a professional trader from Europe. He would give you practical advice how to become a trader and avoid mistakes on the basis of his own personal experience.
But, first of all, let us find out (if someone does not know yet) – what a trader is.
Start to use ATAS absolutely free of charge! The first two weeks of use of the platform give access to its full functionality with 7-day history limit.
Trader – what is it? Trader means a merchant. And, although trading has a broad sense, most often, they mean an exchange trader when they say “a trader”.
Traders buy and sell securities – shares, futures, commodities, currencies, bonds, etc. – on the exchanges. An exchange is a place of work of a trader. But, in reality, traders work at home or in a private office, connecting to the exchange via Internet.
Due to development of online trading on the exchange, the number of traders in the world grows fast. According to brokernotes.co, there are more than 3 million traders in Europe and their number doubled during 2020. But it does not mean that they all make profit on the exchange.
A beginner trader, most probably, will lose money. While a professional trader will make profit more often than suffer losses. A professional trader uses his knowledge and experience to analyze the market and, based on his conclusions, buys undervalued stock at the low. And when the stock goes up, he sells it at the high.
The goal of a trader is to make profit. On the one hand, the trader profession is based on a pure speculation and could cause disapproval. On the other hand, traders deliver benefit through filling the financial system with liquidity, stabilizing it, satisfying incoming supply and demand and financing production.
DO YOU WANT TO TEST YOURSELF AND BECOME A TRADER?
Let us meet a professional trader in order to learn:
- how he started to trade on the exchange
- what mistakes he did
- what his advice would be to beginners who want to become traders from scratch but still do not know how.
Hello everybody. My name is Michael Burgstaller. I am 35 and I live in Austria. My country is located in the middle of the European Union. My specialty is Marketing and Graphic Design, however, trading takes most of my time since 2009.
I cannot say that my life before trading and after trading is different. Before trading, I spent a lot of time in front of a computer monitor designing different things. Now I devote my time to studies and analysis. I like both of these occupations.
Michael, how did you become a trader?
I think my story is rather trivial. All financial markets and instruments are very interesting that is why I decided to try something personally.
I started on ZuluTrade and also worked with some European CFD brokers. I made big money and I lost big money at the same time …
I realized very fast that it was really difficult to trade without the information the professionals have, that is why I became interested in the futures markets in 2020. Since then I never came back to CFD trading again …
Let us step aside to make some things clear:
- what CFD is
- why Michael, a professional trader, does not recommend to work with CFD and started to trade futures contracts
- why the futures markets have information, which professionals possess
What CFD is, advantages and disadvantages
CFD is a Contract For Difference of prices. It is a financial instrument, which allows making profit from the underlying asset price change without owning this asset. The underlying assets are stock, currencies, etc.
CFD trading is like betting. If a trader believes that the Apple stock would go up, he buys CFD AAPL and makes profit if AAPL go up.
Main CFD advantages
- high leverage and, as a consequence, a low cost of market entrance. If one wants to buy 1 Google share, he needs to pay its real cost (this is more than USD one thousand), however, one needs to have 2% to 20% of the share cost (depending on a broker) on his account in order to buy CFD GOOG.
- global coverage. There are CFD on currencies, cryptocurrencies, stocks of companies from various countries, indices, oil, gold and other underlying assets. After connecting to a CFD broker, you can start trading from one platform in different markets immediately.
- higher risk which is connected with a high leverage
- high spreadsbetween ask and bid (what ask, bid and spread are)
- despite the fact that CFD products are provided by reputable brokers, the market of contracts for difference of prices is poorly regulated.
Also, one of CFD disadvantages is deficiency valuable information in this market. We do not mean the information background, such as news, rumors and forecasts.
WHY THE FUTURES MARKETS HAVE INFORMATION POSSESSED BY PROFESSIONAL TRADERS
The forward market provides more information about the processes of buying and selling, which provides better possibilities for analysis and making decisions regarding the quality of supply and demand and search for support and resistance levels. Analysis with the help of professional instruments cannot be compared with very simple strategies the beginner traders use.
In order to demonstrate what information we speak about, let us look at 2 charts.
- The first one shows the process of trading futures contracts on the SBER stock; it is the cluster type of a chart.
- The second one shows CFD on Sberbank stock; it is the standard candle type of a chart.
Timeframes are 5 minutes. The charts cover a short period of time of the process of trading one and the same underlying asset on November 2, 2020.
Take heed of the massive clusters highlighted red at around 14:00. Perhaps, this determination of sellers was the reason of the subsequent price decrease at 14:10-14:15. This makes it more interesting to keep track of the dynamics of buying and selling during 14:45-14-55, when the price went back to the same level.
Let us look at it. The Delta indicator (what Delta is) shows a significant predominance of buying. However, the price growth shows regress. How to interpret this situation as a trader? Assess it from the point of view of the Law of Effort vs Results, about which Richard Wyckoff wrote as early as in 1931. If there is a background of active buying (Effort), but the price “refuses” to grow (Result), it speaks about the bearish mood in the market at the level of the previous peak. It means that, at this moment, there are chances that this resistance level will not be broken. Consequently, a decrease is anticipated. The red Delta indicator marks the beginning of this decrease. This is a reaction of professional sellers to the fact of weakness of bulls.
Note that we read this story solely from the cluster chart. Many professional traders, such as Michael, use it. Can one read this useful for making a trading decision information from the candle chart? Obviously – not.
By the way, the Stoch indicator with standard settings just started to form a signal for selling, while professionals were selling the market actively already. The beginner (and, usually, loser) traders work, most often, with such simple indicators as Stoch in order to enter a market position.
Michael confirms this.
My first mistake in this sphere was that I believed in simplicity of this business – just buy breaks and sell rallies.
I started to study markets and their structures. And I started to use ATAS sometime in 2020. It was the period when I went deep into futures, volumes and order from techniques.
I can state that I tried practically EVERY product in this sphere and saw it for myself that there is no other software for traders, which would provide such a freedom of action and offered so many opportunities.
Another strong point of my decision is a personal support and a possibility to develop own instruments with the help of ATAS API.
In my work I mainly use my own developments and, of course, such basic instruments as Cluster Search and various market profiles.
There is one good way to compare my trading with ATAS and without it: put a plastic bag on your head and say what the weather is like outside. The same is judging the futures market without ATAS. The platform provides me with additional information, based on which I apply a completely different trading approach – it helps me to make a correct decision – when to enter the market or when to exit the market.
ATAS is good various trading styles. The platform provides you with such an arsenal of instruments that you can develop any types of strategies.
Can I recommend ATAS to my friends? Yes, I do it for a long time. As I already said, this is the best trading solution for me.
Well, we came to conclusion that on the way from a beginner to professional trader one needs to:
- trade on professional markets. For a trader this means to connect to regulated official exchanges, which provide full data about volumes of purchases and sales with up to one transaction accuracy.
- to use professional software for analysis and trading.
But there is a question: how much time will it take to cover this path? Let us listen to what a professional trader says.
It is difficult to say how much time you need to start positive trading. I think it all depends on a person. Not only on person’s ability to study technical things, but also on a psychological type of a person.
What I can state with 100% guarantee: the trading is not a thing you can study in two weeks … Technical part is the simplest one, while the most complex one is psychology. Speaking honestly, during my first 4 years of trading I always tried to beat the market, now I trade together with the market.
I would give three advice to every beginner trader who wants to approach the professional level:
- study how the futures markets work and don’t waste your time on CFD
- do your own research
- do not trust everyone who gives you advice – 90% of trading trainers are cheaters.
Summary from the professional trader interview
- do not think that trading is a piece of cake. The “buy when the price goes up” rule does not work;
- choose professional platformsfor trading on official exchanges;
- devote more time to the trading psychology
- use professional softwarefor analyzing and trading.
Start to use ATAS absolutely free of charge! The first two weeks of use of the platform give access to its full functionality with 7-day history limit.
Part 1 – How To Become a Pro Forex Trader: Building the Foundation
Building a Foundation for your Forex Trading Career
This week, I am starting a 4-part blog series on “How to Become a Professional Forex Trader”. It will be laid out in a step-by-step easy-to-follow manner. However, before we get started I must issue a note of caution; simply reading this 4-part series alone is not going to make you a pro trader. You have to actually use the information provided within this series and understand that there is no “quick-fix” to trading the market for a living.
Becoming a pro trader is going to take time and effort on your behalf, and you will probably experience some ups and downs along the way. However, you should not be discouraged, because the sooner you accept this reality, the sooner you can get on the path to becoming a professional currency trader. Now, let’s get cracking…
Step 1: Be honest with yourself
First off, let me clarify something; becoming a professional trader is the result of first being a consistently successful trader and building up your trading account and trading skills over time. Thus, your aim as you begin your Forex trading journey should be to FIRST become a consistently successful Forex trader, but that does not necessarily mean you will become a “professional” or full-time trader right away. As I mentioned in the opening paragraph, becoming a pro trader is probably going to take a good deal of time if you are starting from a small trading account, but that does not mean you can’t make consistent money each month in the meantime.
Consistently successful trading and professional trading might sound like the same thing, but they are not. Your aim should first be set on making consistent money each month relative to your account size, not on becoming a pro trader right out of the gate.
You see, if you have a $1,000 trading account for example, you will not be able to make enough money each month to live off of, and if you try to trade your $1,000 account like it’s a bigger account, you’ll end up blowing it out.
So, if you eventually want to be a full-time professional Forex trader, you have to first aim a little bit lower; you need to aim to make consistent money each month while simultaneously implementing effective Forex money management. This is called being honest with yourself about what is really possible given your current financial situation, and many traders simply don’t do this.
You need to think about your trading in terms of dollars risked vs. dollars gained, not in terms of “how much money do I need to make to quit my job and buy a Ferrari”, which is how most beginning traders think. Pretend that you are trading a 1 million dollar account even if your account is only 1 thousand dollars. If you can consistently average a 3R reward each month (meaning a reward of 3 times your overall risk) then that means you are making 3 x 12 = 36R per year. Now, if your per-trade risk on a $1,000 account is $25, that would be $25 x 36 = $900 in a year, or a 90% yearly return; a very very good performance by any professional’s standards. Now, take that 36R and imagine you are trading a $100,000 account; it would equal $90,000 over a year if you risked $2,500 per trade. The return would be $900,000 on a million dollar account if you risked $25,000 per trade.
Do you see my point here? Sure, $900 a year might not seem like a life-changing amount of money, but what you need to understand is that if you are consistently making 36R per year on a $1,000 account for example, the exact same processes and thinking that resulted in that $900 and 90% return WOULD result in a life-changing amount on a $100,000 account. So, the point is that focusing on the actual process and mechanics of trading is far more important than trying to make a lot of money on a small account. If you are pulling a number like 36R or even 15 or 20R a year, you will have no problem finding funding for your account or getting a job with a prop trading firm.
Before you begin learning how to trade or before you open a demo account, you need to sit down with a pen and paper and make a monthly budget. You need to list all the expenses you have each month and then subtract them from your monthly after-tax income, if you have any 100% disposable income left over then it’s OK to use that money to trade with. If you find you don’t have any disposable income left over each month, you’re better off saving your money or finding a different job until you are able to make some money to trade with.
The reason why I am telling you this is because most traders never do this; instead they end up trading with money they really should not be trading with, and also because if you truly trade with only 100% disposable income you will significantly reduce the potential of becoming emotional on any one trade. So, if you really think you have what it takes to become a Forex trader, and you are going to be honest with yourself about what is possible given the amount of starting disposable income you have, then it’s time to move on to the next step of learning the basics of Forex trading…
Step 2: Learn the basics of Forex trading
Next, if you have fully accepted that you need to focus on the process of trading rather than the money, and you know you aren’t going to get rich quick on a small trading account, you should focus on actually learning to trade.
Now, it might seem obvious that you should learn the basics first, but most beginning Forex traders simply have no clue what they are doing as they learn to trade. Many of them ignore the basics of Forex trading and of learning how to trade; this is a big mistake because if you really want to become a professional at something you have to start by understanding and building a foundation on the introductory concepts. You should first get a solid education in the foundational concepts of Forex by taking my free beginners Forex course. After you have done this and you thoroughly understand what the Forex market is, why it exists, and how to make sense of it, then you should move on to learning a real-world trading strategy like price action.
I can assure you that if you take this one extra step of learning the basics before you start buying trading systems and strategies, it will save you a lot of frustration, time and money, as well as put you far ahead of most beginning traders who simply dive-in head first without first building a solid foundation to trade off of.
Step 3: Learning to trade with an effective strategy
After you have completed steps 1 and 2, it’s time to learn some real-world trading strategies and really start getting into the “meat” of Forex trading. Now, there are thousands of different ways to trade the market out there, but if you want to learn how to read the raw and natural price dynamics of a market, I suggest you learn to trade forex price action strategies. By making price action trading your primary trading strategy, you will develop chart-reading skills that will last a lifetime and make any other strategy or system you use even more effective. As you probably know by now, I am a huge proponent of “pure” price action trading, and I really feel that it’s the best way to trade the Forex market.
The price action strategies and methods that I trade with and teach my students have served me well for many years now, and it’s because there is nothing complicated about them. I simply use my ability to read and interpret the overall market structure to find high-probability price action setups, and I watch for these obvious price action setups forming at key chart levels. Thus, there is no confusion or uncleanliness to my trading approach; it’s all about taking advantage of high-probability price action events in the market and knowing how to make sense of and read the ever-changing market conditions.
In Part 2 of this mini series (click here) – I am going to share with you guys the importance of testing your trading strategy as well as how to track your progress and develop a trading plan. These next steps are critical in refining your trading approach and developing an organized and structured trading routine that will guide you when you switch to real money trading and help you avoid becoming an emotional trader. If you want to learn more about my price action trading strategies after finishing steps 1 and 2 in today’s article, check out my Forex price action trading course and members’ community.
How to Become a Trader – Guide to Reach the Pros
There are a lot of misconceptions about online trading especially in depicting the real job of a pro trader. This time we will show what it takes to become a professional trader, what are the different paths you can experiment with.
What type of trader you want to be?
First, let’s make it clear what the trader is. Trader as a category, is so broad, that it is almost meaningless. Basically, you can differentiate two types of trader: retail trader and institutional trader.
Before we jump in, let’s see some example of professional traders:
Describing the group of retail traders is like analyzing the animals of a zoo. But in the end, there are only two types of retail traders. The ones that get fed up with losing, and the ones that carry on and eventually become successful. The bright side of the story is that from being successful, you can build your own brand and influence others like Tim Sykes (later on him). Also, retail traders can earn money from social trading – our eToro review will introduce you to this topic – or from collecting subscribers to webinars and special mentoring.
Institutional trader as a category refers to the employee executing trades at the big investment bank, brokerage firm, or other companies. You will get fix salary and hopefully a hefty bonus at the end of the year.
However, this job requires that you can work under huge pressure and take the risk. You will risk your firm’s money. But guess what happens if you don’t get the market pulse for a couple of weeks or simply just lay back for a while until the next trading opportunity arrives? You are fired.
This handy table highlights the pros and cons of the retail and institutional traders.
|Institutional (market maker)|