We have collected information throughout the web to summarize what the most profitable traders have in common.
Many dreams of becoming professional traders because of the freedom it creates.
Imagine that you can wake up whenever you want and go and come to work as you like.
In addition, everything you need is a Wifi which makes it possible to work from anywhere in the world. Since the crypto markets are open 24/7, there is no need to be in the correct time zone either.
However, many influencers and media sometimes simplify the road to becoming successful and professional traders.
In this article, we have summarized four steps you will have to accomplish to be able to live on your trading.
- Optimize level for profits and losses
- Set goals for your trading
- Improve your self-discipline
- Socialize and connect with other professional traders
1. Optimize Levels for Profits and Losses
When taking a position, always add a stop loss level and a take profit level.
Make sure to have a logbook and note how the results would have been impacted if the levels were changed.
For example, note the outcome and the possible outcome if the stop loss level and the take profit level were 30% closer and further away from your set target.
When you have collected some data points, this will help you to understand if your stop losses and take profit levels are too tight or too wide.
Keep optimizing your levels for profits and losses all the time.
2. Set Goals for Your Trading
Always avoid taking too large trades and positions about your total portfolio value. A standard benchmark is never having more than 1% of your trading portfolio in one place.
The level is individual since some traders take hedging positions and reduce the risk for each trade.
Another example is to start thinking about what your monthly goal is to be able to live from your trading.
From here, break it down to daily profits.
For example: Let’s say your monthly goal is $6000, and the daily goal is to make a $200 daily profit. Now, are you comfortable with these levels are do you need more each month to live on your trading?
If you think you need more, you will either need a more extensive portfolio value or you need to take a higher risk to reach that level.
Make sure to find a risk level appropriate for your portfolio value and that you are comfortable with. If you ever come into a position you need to “hunt” to get back on track you are at too high a risk level.
3. Improve Your Self Discipline
Your self-discipline level can never be good enough if you are about to become a professional, successful trader.
There will always be trades where you have to take losses, and you can always reduce the number of traders and decrease the amount for each transaction.
Here, you must have a process you believe in and improve over time and not make decisions based on fear, greed, or other emotions.
There are several ways to reduce emotional trading; here is one example.
Use three different portfolios and trading accounts.
- Crypto portfolio with no rules
- Crypto portfolio with strict rules
- The perfect dream portfolio
1. Crypto Portfolio with No Rules
Test new strategies and get collect experience. Make sure to test new trading instruments and just collect as much information as possible.
2. Crypto Portfolio with strict rules
Here, you must follow your trading process and your trading rules. This is your everyday trading portfolio where you make the most trades and continuously follow up in your log book.
3. The perfect dream portfolio
You only use this portfolio when the perfect opportunity appears, which is probably only a few times each month as a benchmark.
Remember, some weeks there might be several times, and sometimes there is not a single opportunity for several weeks. This is just how probability and randomness work.
All your requirements must have been ticked when you use this portfolio for trade.
For example: If you have a list of 10 requirements that you usually are waiting for 5-7 to be filled, this portfolio should only be used when all 10 requirements are checked.
4. Socialize and Connect with Other Professional Traders
Many traders feel lonely sitting in their homes, taking profits, and living their lives with limited social interactions.
Creating social interaction and a trading community has several benefits for you.
- A robust social network is essential for psychological and physical health. Several studies are pointing in the same direction. It’s crucial to have good mental health to manage successes and setbacks.
- It’s a big advantage to be able to learn from like-minded people.
- It’s a big benefit for people to talk to other people experienced similar situations.
Why is it so lucrative to become a professional trader?
There are essentially two things that attract people to become professional traders.
- You are directly evaluated as “wrong” or “right” by the market. It means your endorphin kickback comes very fast and sometimes immediately. In addition, you are always continually assessed by an independent actor. No referee or boss is judging your behavior.
- You can compete in the same markets as the world’s best traders and on “almost” equal conditions. By “almost,” we mean that people with a higher net worth can more easily access information and trading tools since the cost of such helping tools is much less percentage-wise compared to total portfolio value.
What are the most significant risks of becoming a professional crypto trader?
There are several risks to becoming a professional crypto trader. The highest risk is losing control over the portfolio and taking more significant risks, not at all connected to your initial strategy and process.
If such a lousy spiral has started, it’s straightforward to find excuses such as “bad luck” or “extreme” market conditions.
Make sure to stop when you can still handle your losses if you find that trading is not a profession appropriate for you (And professional trading is not suitable for most of us, so it’s not any personal loss).
How much do I need to be a professional crypto trader?
This is very hard since it’s dependent on so many different parameters.
Some benchmarks could be (not connected)
1. Make sure to have savings on the sideline. You don’t want to start with pressure to accumulate profit over the months.
2. Make sure you don’t set the expectations too high. Services are giving 10-14% APY on stablecoins. You should aim higher since otherwise there is no reason to spend time, but don’t expect to continuously make something like 100% yearly.
What are the most common mistakes crypto traders make?
There are many different common mistakes from crypto traders. The most common are probably taking too much risk on a single trade to catch up for a temporary loss.
Other common mistakes are emotional trading and no strategy. and too large positions compared to the portfolio value.
Read more about the most common crypto trading mistakes.
What does it mean to have trading as profession?
Trading life as a profession comes with a lifestyle connected to continuous risk management, lifestyle, habits, and psychology.