Become a Trader – Common Mistakes
I have lost count of the number of people who have asked me this question. Last week alone, I met three people who wanted to know how they can quit their job and become traders. Many have read my story. A few years ago, after graduating from my undergraduate course, I landed a very good job with a global humanitarian organization. I then quit the job to become a full-time trader and I have never looked back. In this article, I will highlight five mistakes you should never do when quitting your job to become a trader.
#1 – Not Having a System Ready
The first mistake you should never do when you want to become a trader is on having a system. A trading system that you have created is a very important tool for you to use in your trading. The system, which can either be manual or automatic will help you make important trading decisions. An automatic trading system is developed by taking a number of indicators and giving them instructions on what to do when certain parameters are met. On the other hand, a manual system is one where you have to do the analysis yourself. The system that you decide to use should be backtested to ensure that it performs well. Quitting your job when you don’t have a system can be very dangerous for you.
#2 – Not Having Enough Money
You should never quit your job unless you have saved enough money to last you at least one year. As a you are going to become a trader, you need to understand the risks that come with it. Trading is a very risky area where you can lose all your money within minutes. Therefore, you don’t want to risk your job and then risk your life by not having a good contingency plan. You should work and save good money that can last you for at least one year. Then, you should trade using the remaining cash. I have seen people who have left their jobs, lost their money, and lived a hard and stressful life thereon.
#3 – Complacency at Work
Another mistake you should avoid at all costs is complacency at the work place. After you decide to quit your job to become a trader, you should not be complacent at your job place. Instead, you should continue working hard and giving all your attention to your work. You should not reduce the momentum of your work just because you have your new ambitions of being a trader. This is because there are chances you might return to the same company when trading is no longer profitable. You should treat all the colleagues and your boss in a respectable manner.
#4 – Not Having a Fallback Plan
Trading will not always work out. In fact, most people who start trading fail at one point in time. I am an experienced trader but I have lost money before. In fact, this month I lost a considerable amount of money. As you quit your job to become a trader, you need to have a fallback plan on what to do if trading fails to work. Having this plan will help you continue with your life if trading fails to work. For instance, you can start a small business during this time.
#5 – Overconfidence
This is another mistake you should always try to avoid. As a trader, you need to realize that there are five stages that you will go through. If you are a new trader, you will go through these stages: unconscious incompetence, conscious incompetence, the aha moment, unconscious incompetence, and conscious competence. You should now take time to understand the stage you are in. I advise you to stay at your job if you are in the first 3 stages and then quit once you hit the fourth or fifth stage. Also, you should avoid counting your chicks before they hatch. You should never budget for the funds you have not yet received.
Become a Trader – Useful Links
- Discover how to become a trader on Investopedia
- Learn more about becoming a trader on Business Insider