5 Skills That Traders Need (2024)

FAQs

What skills do you need as a trader? ›

The 3 5 7 rule works on a simple principle: never risk more than 3% of your trading capital on any single trade; limit your overall exposure to 5% of your capital on all open trades combined; and ensure your winning trades are at least 7% more profitable than your losing trades.

Key Rules from Iconic Traders

Trade with the trend: Follow the market's direction. Do not trade every day: Only trade when the market conditions are favorable. Follow a trading plan: Stick to your strategy without deviating based on emotions. Never average down: Avoid adding to a losing position.

What is a Skilled Trade? Skilled trades are occupations that require a special skill, knowledge or ability which can be obtained at a college, technical school or through specialized training. Skilled trades provide an alternative to jobs that require four years of college education.

According to this rule, 90% of novice traders will experience significant losses within their first 90 days of trading, ultimately wiping out 90% of their initial capital.

In investing, the 80-20 rule generally holds that 20% of the holdings in a portfolio are responsible for 80% of the portfolio's growth. On the flip side, 20% of a portfolio's holdings could be responsible for 80% of its losses.

Rule 1: Always Use a Trading Plan

You need a trading plan because it can assist you with making coherent trading decisions and define the boundaries of your optimal trade.

You should make trades based on your plan if your trading plan relies on technical analysis. The key is to adjust your position size to give yourself enough room to stay within your predetermined stop loss and not risk everything on a single position.

What is the mindset of a good trader? ›

Winning traders are flexible.

They aren't ego-invested in their trades. They are able to always view the market objectively and easily cast aside trade ideas that aren't working. Winning traders do not hesitate to risk money when they see a genuine profit opportunity based on their market analysis and trading strategy.

The 123 bullish pullback pattern is a method of identifying a pullback trade that occurs over 3 swing moves. It is a 5-column pattern. It is a method to identify when the retracement falls below the bullish breakout level and price again starts moving up.

ABCD pattern rules

In the move from A to B, the market should not go beyond either A or B. In the move from B to C, the market should not go beyond either B or C. In the move from C to D, the market should not go beyond either C or D. In a bullish ABCD, point C must be lower than A and D must be lower than B.

As a beginner, focus on a maximum of one to two stocks during a session. Tracking and finding prospects is easier with just a few stocks. It's now common to trade fractional shares. That lets you specify smaller dollar amounts that you wish to invest.

The stock market, like everything else in the world, is all about risk. While it may seem like luck plays a role when you're making money, at some point, it needs to be skill-based.

Required skills and experience

Proven experience in stock trading, with a track record of successful portfolio management. Strong analytical skills, with proficiency in technical analysis and fundamental analysis. Knowledge of financial instruments, including stocks, bonds, futures, and options.