So You Think You Want to Be a Trader?

Ready to take the plunge and try your hand at the trading game? If so, you have a lot of work to do. This is an obsessive discipline that rewards its enthusiasts in many ways beyond cold, hard cash. But you'll also discover it's the toughest thing you've ever done.

What's the best path to success for new traders, and how can they shorten the learning curve? I've put together this checklist to address many of the tasks required to get set up and ready to go.

Commit capital. Figure out how much cash you need to put into your trading account. This should be discretionary capital you can lose without a major disruption to your lifestyle. Trading is harder than it looks, and the odds you'll succeed are a lot lower than you think.

Pick a trading strategy. Then learn it inside and out. I like swing trading because it holds positions longer than daytrading, without the slow crawl of investing. But the markets will accommodate a wide variety of tactics, so find the method that matches your personality and lifestyle.

Choose a trading style. Decide whether to pursue a discretionary or systems trading style. Discretionary traders watch the markets and pick their entries through real-time analysis. Systems traders build automatic rules and backtest them to see how they perform in different conditions.

Experiment with different ideas. You won't be locked into your initial trading strategy for life, so experiment with a broad variety of ideas as your knowledge and experience grow. Sooner or later, the market will tell you what works best, given your unique circumstances.

Find a good broker. A good broker means the difference between lost opportunities and substantial profits. Most new traders need to choose between a classic discount broker and a direct-access broker that offers execution through electronic communication networks (ECNs).

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Alan Farley is a professional trader and author of The Master Swing Trader. Farley also runs a Web site called HardRightEdge.com, an online resource for trading education, technical analysis and short-term investment strategies. At the time of publication, Farley did not have any positions in any of the stocks mentioned in this article, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Farley appreciates your feedback and invites you to send it to [e-mail]. Also, click here to sign up for Farley's premium subscription product The Daily Swing Trade brought to you exclusively by TheStreet.com.

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