All You Need To Know To Become A Proficient Stockbroker In 2020

All You Need To Know To Become A Proficient Stockbroker In 2020

Thanks to the internet and the use of electronic communication networks (ECNs) in the stock market business, stock trading has become a profession that everyone can try out. It is no longer an exclusive club consisting of only MBA graduates or people with a finance background.

Among the several alternative career options coming up in 2020, a professional stockbroker is one of them. So, if you are interested in becoming an expert stock broker, here is a beginner’s guide to getting started.

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How to Go From an Amateur to a Proficient Stockbroker

Stockbrokers are of primarily two types: the professional stockbrokers for whom trading is the full-time job, and the part-time stockbrokers who have another day job but trade on the side. Depending on the type of stockbroker you want to become, you should know and practice different things to succeed. Here is an overview of some such factors.

1. Initial Investments

Every stockbroker needs to set aside some capital to start trading, and this minimum amount can vary based on the market you want to enter or the securities you wish to purchase and sell. For example, forex accounts need as little as $100 as an initial deposit, whereas the margin accounts that pattern day traders use need $25,000. The advantage of being a professional trader working for an institutional brokerage is that it provides investments for you.

However, the other option for part-time or amateur traders is to join a proprietary trading firm. These companies invest their capital for direct market gain rather than earning commissions from clients. So, if you work with such a firm, they typically hire you on a contract basis, where you get a cut of the company’s profits but not a regular income.

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2. How to Stay Updated?

Any stockbroker with an MBA education would be well-versed in the basics of trading and stock market terminologies. If you are new to this domain, there are plenty of online resources – from stock market dictionaries to full-fledged online courses – to guide you all the way.

If you want to play it safe by trading without losing any money, you can create a paper trading account on some online platform that gives you free stocks and virtual currency. You can experience what the real stock market is like, practice your strategies and tactics, but with nothing to lose. No matter how much you read up, you will get the hang of trading only when you get hands-on experience in a real or simulated market.

3. Tools and Resources Available for Proficient Stockbroker

If you are a stockbroker for a brokerage, the tools available to you vastly outnumber the tools an independent trader would have. Some free or premium resources for analysis, tracking, and automatic trading are available online for you to use. As a professional trader, you have access to more sophisticated instruments (particularly those used in algo trading) and datasets.

In today’s world, most of the executed trades are made by computers, especially the high-volume and high-frequency trades. As a part-time trader, you may not be interested in such deals worth millions of dollars, so you do not need such expensive software tools either. However, it is still your advantage to invest in purchasing some of these tools if you are serious about making money from trading.

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4. Learn From Your Mistakes

Even the most skilled stockbrokers make erroneous decisions when they trade, and as a beginner, you are very likely to commit mistakes. Seeing a string of losses can be discouraging, but the key lessons here are that you should not give up, and you should learn from the errors you made.

Maintaining a proper log of your trading activities is good practice. Here are some pieces of information you should record on a daily or weekly basis:

• Total investments and the number of shares traded
• Missed opportunities
• Lessons learned
• Any other relevant statistical data

Most online trading platforms today have an inbuilt feature that tracks your progress of trading on that platform. You can ask for analysis reports on a weekly or monthly basis to monitor your performance. The platforms also have a chatroom feature where you can interact and share ideas with other experts in the field.

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5. Devote Time and Effort to Trade

To be successful at trading, you need to invest time and effort into your work, and not hope to get rich quickly by dabbling. There is extensive research behind getting trades right, and you must understand all the rules, technicalities, and the associated nuances. Concepts like the wash sale rule, PDT rule, and terminologies like candlestick charts and arbitrage may be hard to grasp.

If you hope to be only a part-time trader, deciding which hours of the day you will dedicate to trading is a crucial decision. Usually, the market is most active (or volatile) within the first hour of opening and in the last trading hour. Experienced traders can also venture into the riskier domain of extended-hours trading, which occurs before and after the regular market hours.

6. Choose Your Market or Specialty As A Proficient Stockbroker

From forex to futures markets, from stocks to bonds, European to Asian stock markets, the venues you can trade in are vast. Without the necessary tools to handle the multitude of trades going on every minute, you should plan to narrow your area of focus to a couple of markets or securities. By doing so, you can channel your efforts better to execute deals correctly, as well as become proficient within a concentrated market.

Based on your level of risk-aversion, you can decide where you want to put your money. For example, among stocks, the most secure ones are referred to as “blue-chip” stocks, and among bonds, the US Government Treasury bonds are the safest investments.

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Are You Ready to Trade?

Remember, trading is not everyone’s cup of tea; your first few weeks could be rough where you face several losses. However, persistence and continuous effort are required for the best stockbrokers to succeed.

Do not consider trading as a form of gambling; luck has a minimal role here. With enough practice and lessons, you can build strategies to ensure continued success in the stock market. Being a stockbroker can be quite lucrative if you put in the effort to become the best in the business.

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