So You Think You Want to Be a Trader?

Perform a reality check. Ask yourself if you have the ability or desire to watch the real-time markets during the trading day. Those who want to follow every tick do better with direct-access brokers, while end-of-day traders with responsibilities outside the markets will find that a discount broker meets their needs.

Get an education. Now you're all set up and ready to go. This is where the trouble starts, because it's easy to enter positions without a trading plan that works. So take a giant step back and get an education in technical analysis before you make your first trade.

Read some books. Three classic trading books to start with are Trading for a Living by Dr. Alexander Elder; Technical Analysis of Stock Trends by Edwards and Magee; and Technical Analysis of the Financial Markets by John Murphy.

Buy some software. You don't have to spend a fortune to watch the markets. There are free alternatives provided by your broker, as well as inexpensive charting programs that won't empty your wallet. Two solid choices for budget-minded traders are StockCharts.com and Medved QuoteTracker.

Learn to lose gracefully. Trading isn't the same discipline as technical analysis, and it will take longer to master than all of those charts and patterns. It also requires real-life experiences with cold, hard cash. And many of these will be painful and costly.

Avoid paper trading. There's no substitute for placing your own capital at risk. Many educators tell students they should paper-trade before taking real market positions. I don't agree with this at all. Simulated trading doesn't show how the markets really operate, and it also builds false confidence.

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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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