10 Skills Master Traders Must Develop

Day trading became a well-known “thing” several years ago when individuals began to speculate on the markets on their own. Before this time, trading occurred via licensed brokers, who took commissions on each action taken by an investor. The Internet has changed all of that. There are now “discount trading” venues all over the web, and individuals can buy and sell at will.

The problem is most of these traders do not do very well. And why is that? They just don’t have the required skills. It takes both abilities and lots of practice (including mistakes) to become a master trader.

Let’s unpack the 10 crucial traders skills.

#1 Acquire Functional Educational Background

Unless a trader has a basic understanding of financial markets, economics, and some technical analysis ability. While there are some tools to use for analysis, there is still the need to interpret those analyses correctly. And that does take some academic learning. According to 99Papers, an online academic writing assistance agency, students of economics and finance face challenging coursework. Traders don’t need to have degrees in these areas, but they do need to complete some related coursework.

#2 Use Math correctly

Of course, basic math skills are necessary to calculate profits, losses and keep records. This is not an issue with the majority of traders who only need a functioning calculator and know which mathematical algorithms to use.

#3 Develop Data Analysis Skills

Successful traders need to be able to analyze data and do so quickly. Trends and patterns are usually represented by charts and graphs. Skilled traders can analyze this data so that they can predict individual stock and overall market trends. This must be a constant activity, sometimes minute by minute, often hour by hour, and certainly day by day. Again, some tools will help with these interpretations, but the most successful traders eventually learn to apply probability on their own. Probability and statistics begin to be taught in middle school, and it would not hurt to take a refresher course.

#4 Focus on One or Two Specific Sectors

It is simply impossible for any single person to have the time and focus ability to follow and analyze multiple sectors. Traders know they have to zero in on key data that impact their trades. This requires constant vigilance, and it is impossible to monitor trading activity and data on many sectors. If you tend to “wander” while online, you should probably install some software that prevents you from accessing those popular sites that keep “calling you.”

#5 Lose the Emotions

Self-control is a huge factor in successful trading. Over time, most traders have developed a general trading plan and strategy. Once you do this, stick to it as much as possible, leaving some room to respond to surprise “events.” Too often, amateur traders succumb to their emotions, and their strategies are ignored. This usually happens when a stock or the general market experiences a downward spiral. Fear takes over, and traders then sell-off, in an attempt to minimize their losses, throwing their strategies “to the wind.” This is never a good plan. 

The far better approach is to constantly evaluate and reevaluate the plan and strategy that you currently have in place. Focusing on refining those keeps emotions out of the picture. The goal is to have a “thick skin,” stick with your strategy and focus on how that strategy is performing, not specific stocks.

#6 Do the Research

This cannot be emphasized enough. Warren Buffet would never make a trade without conducting deep research into a company. And you should not either. Stop relying on “tips” from friends who claim to have the inside scoop on a company. You need to have an abiding curiosity and motivation to find all of the information you can on any instrument you are considering. Besides, you should keep abreast of any economic announcements that may impact the markets in either direction. Think about the fluctuations that may occur with elections, with monthly jobs reports, with the Fed’s announcement of a rate change, or even a new law passed by Congress. International events also impact U.S. markets. 

And there are often ripple effects. For example, perhaps Boeing announces a new contract with a foreign country to build a large number of new aircraft. It is not just Boeing stock that will be impacted. Who are the suppliers of the materials that Boeing will purchase to fulfill this contract? If you have done proper research, you will know.

#7 Keep Good Records

This is not just necessary for tax time. You cannot evaluate the performance of your strategy if you do not keep daily records of trades and your profits and losses. This requires attention to detail and lots of self-discipline. At the end of each day, you should enter everything on an easily readable spreadsheet, and then craft a summary of the results. This is the only way you will be able to evaluate your strategy and consider changes that must be made.

#8 Be Independent

Those new to trading will have to acquire some knowledge. This will be done through courses, study, and usually help from others who have been in the business. Having a mentor or two will help in the beginning, but, in the end, you have to build confidence in your ability to work on your own. You must develop your strategy and style that will work for you. This doesn’t mean that you don’t listen to others. It means that you take that information, analyze it on your own, and then take action that fits for you.

#9 Be Adaptable

Yes, you have your plan. But you also know that every trading day is unique. Sometimes markets are flat, sometimes there is huge volatility, and sometimes there are moderate ranges of ups and downs. Keeping to your plan is usually the best action, but you may need to change it out when market “events” occur.  Rigidity is not always the best course of action. And there may be days when you need to just “sit out.” 

#10 Be Tough

You cannot let losses discourage you. This will allow emotions to get in the way of rationality. If you succumb to discouragement, you will exist in misery. Losses occur. But so do wins. If you let discouragement take hold, you will probably miss out on the next good trade. “Tough-skinned” traders usually achieve success.

The Wrap

Master traders are not “born” with all of these skills. But most do have at least a few of them. The good news is that you can acquire the skills you do not now possess. If you are serious about becoming a master trader, then you need to engage in some self-analysis. Which of these 10 do you currently have? Which will require some work on your part?

Jessica Fender is a copywriter and blogger at GetGoodGrade with a background in marketing and sales. She enjoys sharing her experience with like-minded professionals who aim to provide customers with high-quality services.