Day trading became extremely popular during the pandemic as more people stayed at home. It is estimated that millions of Americans took on day trading as a part-time cash-making activity.
While most of these traders failed, a small number of them succeeded. It is easy to understand why this statistic is so important: many people have opted to attempt a career as a trader without knowledge and, moreover, some of the most critical soft skills.
In this article, We will look at some of the top soft skills that you need as a day trader to succeed.
Hard skills vs soft skills
Broadly, there are two main types of skills that one needs to have in trading: soft and hard. Hard skills are defined as quantifiable skills that are mostly gained through training.
In trading, these skills are those that you need to analyze financial assets and execute trades. They include skills on technical and fundamental analysis.
Technical analysis is the process of using indicators like moving averages, relative strength index (RSI), and MACD. Fundamental analysis, on the other hand, involves identifying news and data and interpreting their impact on the financial asset.
Related » Is Day Trading Riskier Than Long-Term Investing?
One does not work without the other
A trader with the best hard skills will often not succeed if they lack the needed soft skills that are required in the market.
Soft skills are defined as personal attributes that people have. Ideally, a trader with just soft skills cannot succeed in trading because they will not be able to analyze and execute trades.
The best day traders and investors have a combination of soft and hard skills. In most cases, these traders have vast experience in all these skills.
For example, an investor like Warren Buffett has vast experience and expertise in financial analysis, which helps him to identify undervalued companies. At the same time, he has soft skills like discipline and the ability to remain calm under intense pressure.
Best trading soft skills to have
We believe that all day traders should have the best hard skills such as the ability to analyze and predict where a currency pair will move to in a certain period.
However, we also believe that day traders should have specific soft skills. In fact, in most cases, these skills are usually ignored. Let's see together some of the top soft skills to have in trading.
Discpline is an important thing that anyone should always have. It is one of the most important skills that will help you become a highly successful day trader. There are a number of ways in which discipline is seen in the financial market.
First, you should always be disciplined on the strategy that you use. In this, if you are a scalper, you should avoid mixing it with other trading strategies. Similarly, if you are an algorithmic trader, you should avoid doing it with other strategies that you have not tested.
Second, you should have discipline on your capital allocation. In this, always ensure that you don’t risk too much money than what your strategy calls.
Third, another aspect of discipline is on the need for protecting your trades with a stop-loss and a take-profit. These tools will stop your trades when they reach specific levels based on your trading strategy.
Further, you should have the discipline to always journalize you trades, avoid overtrading, and to always avoid leaving your trades overnight.
Being calm under pressure
While trading is an important thing, the reality is that it can introduce a lot of pressure to traders, especially when things are not going on well.
You should have the discipline to ensure that you are extremely calm under pressure. Doing that will ensure that you don’t make bad decisions when things are going on badly.
Patience is another soft skill that you need to have as a day trader. There are a number of ways that patience happens. For example, you should be patient before you move from a demo to a live account. Ensure that you have mastered the trading techniques that you need and created a good trading strategy.
Also, you should be patient when you implement a trade. At times, you will open a trade and see it turn negative instantly. You should have patience to see it turn around.
Make quick decisions
The financial market moves very fast and as a trader, you should work hard to ensure that you can make quick decisions. For example, if a company like Tesla makes headlines, you should be able to understand how the news will impact the stock.
Other trading soft skills from a career perspective
There are other soft skills that you need in day trading. These skills will help you become a more successful day trader. They include:
- Time management skills - Always have a good schedule for your trading and stick with it. Some stock traders focus on the pre-market while others trade during the regular session.
- Risk management - This is an important skill that ensures that you don’t risk too much money per trade and that all your trades are protected.
- Financial management - It refers to how you manage your funds as a trader. For example, you should only risk money you can afford to lose.
- Communication skills - These are also good soft skills, especially when you are working as part of a trading floor or an investment company.
- Teamwork - In line with the previous skill, you should always be a team player. In most cases, teamwork will help you identify new opportunities and grow yourself as a trader.
Why soft skills are important
As mentioned, soft skills alone will not make you a better trader. They need to be combined with hard skills. We have seen excellent technicians who fail because they don’t have quality soft skills like discipline and time management skills.
There are a number of reasons why these soft skills are important, including:
- Mitigate risks - These soft skills help traders to mitigate the numerous risks that happen in the market. When you have quality risk management strategies, you will not risk too much money per trade.
- Manage emotions - These skills will help you to manage your emotions since you will not risk too much money.
- Respond effectively to new challenges - These skills will help you respond well to new challenges that emerge in the market.
- More profits - Further, these strategies will make you be a more profitable trader. If you can combine these soft skills and hard skills, then you will have more possibilities of being a better trader.
How to learn soft skills
In most cases, these soft skills are not learned but developed over time. However, there are different ways to develop these skills.
First, reading books can help you build some soft skills. For example, there are several books on risk and financial management that you can use in the market. In line with this, you can listen to interviews from experienced day traders and investors.
Second, you can learn more about these soft skills by watching live trading sessions. At DTTW, we run TraderTV, one of the most popular YouTube channels in the industry. The channel provides live day trading sessions that anyone can use.
Third, having a mentor or a coach can help you with this. For most new traders, a good way to start is to become part of a trading floor that has several experienced traders. You should learn from these traders.
Further, you can grow these skills by attending workshops and seminars to learn more about these skills. However, it is important for you to know that some of these skills takes time to learn. As such, being patient will go a long way to achieve that.
In this article, we have looked at what soft skills are in day trading and investing. Also, we have noted the benefits of those skills and highlighted how to learn them.
As you will realize, these skills are so important such that anyone without them will not succeed in the industry.
External useful reosurces
- What is the best ways to learn the day trader skill set? - Quora