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Professional Trading: What you need to know to get to the top

Started by Admin, May 16, 2024, 01:36 PM

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Topic keywords [SEO] Forex

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Some individual investors who are passionate about trading even want to make a living from their own trading. While it may seem like the hardest part is creating a solid strategy and implementing it correctly to make regular profits, in this article we'll see that making money from trading also involves a number of decisions that will greatly affect an individual trader's professional path. Let's find out together how to become a professional trader, what steps and decisions are available to an independent trader and how an individual trader can make a living from trading.

Where to begin your journey


Before you can become a professional trader, you need to begin with self-study and then spend many months or years putting what you have learned from your theoretical training into real-world practice. You cannot become a professional trader in a few weeks.

Once you have a good understanding of financial markets, exchange products, technical indicators, analysis methods, trading strategies, money management and trader psychology, you need to build your trading strategy and be able to test it on a demo account, then on a real account with a small amount of capital before moving on to a more substantial amount of capital. Over time, you will need to build your most valuable asset as an independent trader - your track record. To be taken seriously in the world of professional trading, you will need at least two years of experience, and ideally three.

To succeed in trading, you need a solid knowledge of technical analysis and macroeconomics, as well as good computer skills. A good level of English, the language of the financial markets, is also important. In addition, in-depth risk management skills and stress tolerance will be indispensable qualities for becoming a good trader. Rigor, discipline, responsiveness and passion for financial markets will complete the profile of a successful trader.

Becoming a professional trader


The first thing that comes to mind when you think about the beginning of becoming an independent trader is managing your money on your own. For many traders, this is the key to the dream of no longer having a boss and making money working in complete freedom.

Unfortunately, although it's not impossible, becoming a solely self-managed trader requires a lot of start-up capital if you want to make a living at it. While it is often said that you need 100,000 Euros to make a living trading, it depends on your geographical location, your tax situation, your lifestyle and a host of other parameters.

For example, if you achieve a productivity rate of 40% per year, with a capital of 100,000 Euros, your gross income would be 40,000 Euros. Based on a tax rate of 30%, you would have to deduct Euro 12,000. So your net income would be Euro 28,000 per year (or about Euro 2,300 per month). If you are a single person living in the provinces, this level of income may be sufficient. However, if you live in Paris and have dependent children, you will likely need a more substantial income.

Trading capital


Some independent traders also choose to emigrate to countries with lower cost of living or tax levels to reduce the amount of capital they will need to make money from trading.

Keep in mind that in addition to trading capital, you will also need sufficient savings to cover expenses during unfavorable periods. Income from trading is not as regular as a salary, and you may experience periods of loss. In addition, you'll likely have to factor in some start-up costs, such as purchasing high-performance equipment, trading software licenses, and a comfortable workstation (after all, you'll be spending days on end at it).

Joining a trading room


In the US and UK, as well as France (although this is less common), there are trading rooms open to independent traders for a fee corresponding to the rent of a trading desk. Typically, traders who come to the trading room manage their capital independently, but sometimes trading rooms offer the opportunity to join a proprietary firm or organize introductions between traders and investment funds.

The advantage of working in a trading room is the availability of professional equipment (trading station, multi-screen, trading table, etc.), all in an environment that is conducive to trading. In addition to socializing with other traders, you will often have access to international financial TV channels such as Bloomberg or CNBC. It is also not uncommon for trading room managers to organize training or refresher courses with outside speakers or the most experienced members of the trading room.

Finally, trading room managers usually negotiate favorable trading terms with one or more stockbrokers, discounts on subscriptions to news or analysis services, or even free use of certain trading tools. In this way, traders who are members of a trading room receive favorable terms and rates that allow them to make the most of their job as independent traders.

Trading solutions without initial capital


If you do not have the necessary capital to begin trading like a professional, there are alternative solutions that allow you to trade large amounts without having to invest your own money or in addition to your own money. These solutions are based on the principle of risk and profit sharing between the trader and a third party (platform, fund, investor, etc.) that provides the trader with start-up capital.

Professionals trading platforms


FundSeeder


Among the solutions available to the trader who wants to become a professional, let's start with FundSeeder. FundSeeder is a platform that allows independent traders to connect their trading account to a worldwide network of potential investors and hedge funds. Fundseeder analyzes traders' performance and assigns them points based on several criteria (profitability, volatility, drawdown, etc.). The best performing traders can be approached by investors and funds to entrust them with capital under management. The trader and investor then agree on the terms of the partnership (amount of capital, duration of the contract, distribution of profits, etc.). Fundseeder acts only as an intermediary between traders and investors.

Darwinex Zero


Darwinex is a more comprehensive solution that goes beyond simple matching. While Darwinex operates on an eToro-like model with copy trading, in 2023 the online broker launched a new offering aimed at allowing independent traders to begin trading with no start-up capital: it is Darwinex Zero. Darwinex Zero is a program that allows independent traders to manage up to Euro 500,000 in capital without having to invest their own funds. The program is based on the concept of Darwins - financial indices that replicate traders' strategies. A trader must first create his Darwin by connecting his trading account to the Darwinex platform. He must then go through several stages to prove his reliability and profitability. If he succeeds, he gradually gets to manage an increasing amount of capital in exchange for commissions on the profits made.

Registration costs 95 Euros, then 38 Euros per month. If you want to go even further, Darwinex offers the Darwinex Pro package, which allows you to create your own investment fund for Euro 10,000 and then Euro 5,000 per year. While this solution is considerably more expensive, it is much less costly than setting up an investment fund on your own.

Trading tournaments


Trading tournaments are an alternative and slightly more exotic way to raise capital while making yourself known and gaining popularity among potential investors. A trading tournament is a competition in which independent traders compete against each other over a certain period of time (day, week, month, etc.). There are several tournaments, such as the one organized by the broker IG, or the tournament at the Salon du Trading held every year in Paris, or tournaments organized by organizations such as the World Series of Trading.

The goal of the tournament is to achieve the best possible return on fictitious or real capital. First place traders can win cash prizes, get into a proprietary firm, or be noticed by recruiters or investors. Participation in tournaments can be free, as with IG, Salon du Trading and World Series of Trading, or paid. So keep an eye out for upcoming tournaments if you want to prove that you are better than the rest.

Wikifolio


For traders who want to trade only stocks and ETFs in the medium term, applying, for example, a swing trading strategy; or for those who want to move into active portfolio management rather than pure trading, there is also the Wikifolio offer. Wikifolio is a platform that allows independent traders to create and publish their virtual portfolios (called wikifolios) and attract investors who can replicate their strategies. Each wikifolio is converted into an investment certificate listed on the Stuttgart Stock Exchange, which reflects the portfolio's performance. The trader receives a commission on the assets under management and the results achieved.

Prop Firms


A trading prop firm is a company that provides independent traders with management capital as well as professional resources and tools (e.g. professional trading or analytical platform, order book reading tools, etc.). Typically, such firms impose a number of conditions that traders must meet, including return, risk and drawdown requirements.

A prop firm allows traders to operate with a pool of capital rather than their own money, allowing them to maximize profits. In turn, traders share a portion of their profits with the firm.

Typically, a prop firm's business model is based on a subscription fee that many traders pay to qualify for managed capital. The fee for joining a prop firm varies greatly and can range from a simple to triple. Be careful as many prop firms hide dishonest offers. Until there are regulated offers from prop firms, we prefer not to recommend them to you.

Advice for the trader


If we could only give you one piece of advice, it would be to be patient. If your goal is to become a professional trader by the end of the month, you're probably in for failure and disappointment. Trading is a tough business and it's not for everyone. It's a job you have to take the time to learn, and learning usually involves a lot of theory, years of practice, and a lot of failure. So don't dive headfirst into the offers of prop firms or trainings that promise you a quick and easy way to become a trader. Unfortunately, there is no way to compress the years of training and experience required to become a professional trader.

Just as if you wanted to learn how to fly an airplane, go step by step, setting yourself a series of goals to achieve over the next 5 years. Wanting to create your own investment fund after 6 months of trading is like wanting to take the wheel of a 747 after reading the first chapter of the pilot's manual.

In conclusion, it should be noted that legal risks should not be taken lightly: being a trader and managing other people's money is a regulated activity. Managing money outside the strict confines of the law is a serious offense that could land you in jail. It would be a shame if you, a talented trader, ended up behind bars due to a lack of attention to regulation. If in doubt, contact the AMF or a specialist lawyer.