How to Become a Professional Trader

Edited by Matteo Talarico

How to become a Professional Trader (it’s not what you think)

Do you know who loses the most from trading? (Hint: they are not retail traders)

Just because you are a hedge fund trader does not mean you are a professional trader. That is why.

When they say “Professional Trader” you immediately think of a hedge fund, bank, or institutional, right? Being a trader among these institutions does not make you a professional trader. It makes you a professional trader, but certainly not a professional one.

Don’t you believe me?

The collapse of Barings, Britain’s oldest bank.

In 1995, trader Nick Leeson, who worked for Barings at the time, collapsed the bank after losing $2.2 billion in a long trade on the Nikkei 225. Quite a loss. Shall we move on?

Long-Term Capital Management (LTCM) Bailout.

LTCM was a fund created by brilliant minds in finance including Nobel laureates Myron Scholes and Robert Merton, creators of the BSM formula for pricing options. In 1998 the fund collapsed following a $4.6 billion loss. The cause of the collapse was the extremely high leverage used in the fund as well as incorrect predictions about the performance of bond markets.

The bailout and collapse of Bearn Stearns.

In 2007 the bank announced its first loss in 80 years. First by $854 million and then by $1.9 billion because of the subprime bubble. Bearn Sterans was rescued thanks to JP Morgan who, aided by the Fed, acquired it.

Now let me ask you a question.

What do the failures of these 3 institutions have in common?

Bad luck? Attitude? No.

They all had gaps in risk management. I assure you that these are only 3 of the failed institutions in history, but we could fill the article with examples.

Then if they also fail, how can we call them professional traders? We cannot

So how to become a professional trader? Risk management is the first essential component in making you a professional trader.

The second component is technique. There are no effective methods that can turn your 1,000 euros into 100,000 euros within a year. I often hear from some colleagues in the investment field that trading courses are a scam because those who teach them are supposed to be super rich and are supposed to keep their magical secrets to themselves. If you hear from a professional, your advisor or anyone else you rely on for your investments, run away, they don’t understand anything about finance.

Of course, I am the first to say that most trading courses are useless, but they are useless because they are not created by professional traders. Trading will not make you a millionaire if you start from a base of a few thousand, but trading can help you build a second economic income, can create wealth for you.

A professional trader knows how much he can earn, realistically

We certainly don’t turn water into wine, because to become a professional trader you have to be well aware of your potential. Certainly if I have a 1,000-euro account, I cannot expect to turn it into a 6-figure account within a year or more. However, I can expect attractive returns on this capital, even 20 percent per month.

Now many people will think: 20 percent a month? Are you out? Not even Warren Buffet does that! Thank you, but I am not Warren Buffet and I don’t have to manage hundreds of billions of dollars. As a result, I will not move the market with my trading and can afford to use a minimum of leverage (always calculated in risk management). Of course it is that with a 100,000 euro account I cannot expect to make 20 percent a month, because then the risk would be too high, my capital being higher. Then I can “settle” for +3/+4 monthly while risking perhaps -1/-2. If I had a 1,000,000 account then I would expect a monthly return of +1/+2.

This is how one should think about markets.

A professional trader has an operational strategy

Operating the markets without an operating strategy is like playing soccer without a form. The effect is disastrous.

So to know how to become a professional trader, it should be kept in mind that not just any strategy is enough, but one that is tested over the years and has produced more successes than failures. What we teach our kids in Trading Winner is just that.

Our operational strategy with a solid backtest of about 10 years. “But if you have a strategy then why are you going to sell it? You should be a millionaire!” is the objection of many. It is sufficient to reread the previous paragraph to answer this question. If you want to become a millionaire in the markets (except in exceptional cases), you must already be a millionaire, or rather, you must already start with a high capital. If , on the other hand, you want to derive a second income then the capital can also be much less.

A professional trader does not stand on charts all day long

The reality is that you don’t need 20 monitors, you don’t need a supercomputer, you don’t need to be an engineer, and you don’t need to lock yourself in your home or office to be a professional trader. Most aspiring traders spend all day in front of charts but not to study, but to trade. Never has this been more wrong. It’s like when you buy the new car, you want to spend a lot of time with it, then after a while you start using it less and less. Same with trading. We saw this on Wall Street, when Marco and I went to train from the best traders in the world. Within minutes after opening a trade they would exit the market.

Trading must give away time. Sometimes all it takes is one trade done right in the morning to break away from charting and focus on something else, such as studying charts or other passions. Only institutional traders spend hours in the office, but because they are not independent.

I hope you find this little guide helpful in your operation. We look forward to seeing you in our groups!

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