Trading is not for everyone as top financial analyst Craig Gradidge says. Hence, to know trading that suits you, it is paramount to identify whether you are truly meant for it.
DailyFX published a podcast on how to know if trading is right for you. In its podcast, ability, willingness, and mindsets become the factors to consider your suitability with the activity.
In addition, these factors might help categorize whether you will be a good trader. Prior to starting to trade, here are the factors you require to ponder.
Also Read: Reasons Why Expert Traders Rarely Share Their Expertise
Trading Ability
In trading, people often mistake ability as solely the knowledge pertinent to the activity to trade. Actually, finance also belongs to the category of ability.
Financial ability is an indubitably crucial factor. To further the importance, traders are suggested to have 10% additional money, that obviously they do not use, as a capital.
The reason behind the suggestion is to prevent excessive frustration when traders lose. If this happens, those whose capital is not their daily money might encounter a more insignificant breakdown than the opposite.
However, this does not mean that those who do not possess such luxury should not trade. A demo account exists for them to practice so that they can minimize the possibility of future losses.
Willingness to Trade
The willingness to trade might translate to various interpretations, but the closest one is pertaining to the motivation to trade. What, accordingly, drives you to trade.
Each trader has a dissimilar factor that invokes their willingness to trade. The willingness to trade might come from a strong intention to generate money. In contrast, some just want to trade as a hobby.
Nothing is right and wrong in terms of willingness. However, knowing your true motivation that affects your willingness to trade can help determine your behavior and strategy when you hit the market.
Traders’ Mindset
Speaking of mindset, you can associate it with psychology. Mindset and psychology are arguably two essential factors in trading.
Traders’ mindsets, to some extent, foresee your reaction when you encounter a win-or-lose situation. The thing is, expert traders mostly encounter more losses than wins, so, if you are not good in dealing with your failure, trading might not be for you.
Traders’ mindsets also help to determine the most appropriate strategy for you, similar to willingness and motivation. Knowing your mindset is helpful to decide the best strategy in a certain period, the active or passive behavior, and a proper attempt to recover from losses.
Also Read: 3 Novice Trader’s Trading Mistakes