How do top traders become top traders? Many have college degrees in subjects totally unrelated to investing, like art, history and engineering. So, how did they advance in one of the most competitive industries? To hear them tell it, they simply educated themselves by reading classic books on the subject, practicing with fake money, watching full-time pros in action and then diving into the profession. Several legendary analysts, traders and market theorists have written books about how they chose their occupations and learned the craft. Everyone’s story is different, but the sum total of what these gurus have to say can be summed up in four suggestions:
By far, the most common advice the top dogs have for all the rest of the dogs is get educated. They are not referring to formal schooling, by and large, but to self-directed education. That can mean reading the classic market literature, working as a floor trader for a small brokerage firm, spending time as an intern at a company that has a seat on an exchange, or simply taking the time to read online tutorials about how to earn money in the stock market.
Choose a Specialty
One of the most common ways that professional traders learn how to select winning stocks is through specialization. It’s hard to become an expert in every sector and every kind of market. That’s why you’ll notice that even the most astute analysts on major media programs specialize in, at most, one large sector, like health care, technology or consumer goods. In fact, most full-time analysts and professional financial advisors drill down even further, honing in on minute corners of larger fields. For example, the largest New York advisory firms have staff members who specialize in areas as narrow as home security appliances, real estate financial services, long-term care facilities and other tiny fractions of fractions of sectors.
Study Day Trading
The majority of elite professionals were, or are, engaged in day trading for their own accounts or for others. The study of day trading is considered a core component of any professional’s education in all things market related. One reason day trading is so valued by top professionals is its ability to teach people the inner-workings of the exchanges. Buying and selling securities as a full-time job is a learning experience, to say the least.
Trade simulators are usually the first step experts suggest for anyone interested in this type of work. Modern advances in AI and sophisticated strategy games can go a long way toward teaching even the most inexperienced person how to buy and sell with complete confidence and admirable accuracy. Fortunately, most online brokerage firms allow people to use simulators for practice. A few require that you open an account beforehand, but most do not. If you want to get a feel for what it’s like to day trade, buy and sell options, or specialize in selling short, then a simulator is the way to go. In fact, there are some products you can purchase as stand-alone simulators but they can be pricey. Opt for the free ones to get a taste of real-life action.