Everyone that comes into trading does so for different reasons. For some, it is something they have been interested in for as long as they can remember and is a career goal. For others, they are looking for a way to supplement their income or manage their own investment or retirement funds. Others are tired of their current career path and are looking for a job where they can work from home on their own hours. No matter what your objectives, one thing remains certain: without a solid foundation, your trading career will be short-lived and costly.

Trading is a profession, whether you approach it part-time or full-time. As with all professions, there is a learning period. It is next to impossible to come into trading and succeed right away. Even with traders who do well to begin with, very few manage to hold onto those gains. Some professions require very few skills to succeed. For instance, nearly everyone out there can qualify as a cook at the local fast food joint. The downside is that they are locked into a minimum wage to slightly higher than minimum wage job which will take years to advance from. As with most professions that have the potential for greater rewards, trading successfully requires a good deal of education in terms of market dynamics. Even then, success is by no means guaranteed. There are many factors that can lead to failure. Coming into the market under-funded is one of the main ones.

Unfortunately, when it comes to the market, the old adage: “It takes money to make money,” tends to be true. Too many traders come into the market without realistic expectations as to just how long it takes to learn to earn a living consistently and what it actually takes to do so. Just as a surgeon must invest a great deal of time and money into developing his or her career before s/he begins to reap the rewards of their investment, so to must a trader pay his or her tuition. For some, going to med school would have been cheaper, for others they fare better, as if attending with grants, etc. As with any higher education, the amount a student of the market actually ends up paying varies greatly. As in all higher education, it is very rare to ever get a “full ride.”

When you begin trading, it is realistic to assume that if your goal is to trade full time, it will take six months to a year to just breakeven. It can then take a year or more to actually make consistent profits. As such, you should plan on living expenses for that length of time as well as your initial account investment and money for educational expenses, charting expenses, etc. It is here that starting a business plan is essential. You should have an idea of just how much time, money and emotion you are willing to put into this endeavor. Also, are you planning on teaching yourself, or using a mentor or other source of education in helping to further your knowledge more quickly.

I personally did not use a mentor when I started trading. It took me a number of years to really understand the basics, but at the same time, I avoided a lot of garbage that is out there that many new traders are prone to falling victim of. If you find the right mentor, there is no doubt that it came take years off your learning curve. The wrong one will quickly drain your account. Every trader has their own unique take on the market. They have skills you can learn from, mistakes they have made that you can learn to avoid, etc. They also each have their failures, places they need to improve upon and mistakes they commonly fall back to. You can of course learn from these as well.

As part of your education, I would highly suggest assisting traders even newer than you. Being able to explain your actions to others will help establish them in your mind. You will be able to see your own mistakes more easily and be able to avoid them the next time around, as well as see where your own strengths lay. The single most important aspect in my own development as a trader was becoming a mentor. Suddenly “because I think so” was not a good enough reason to take or exit a trade. I had to explain rationally to someone else every single thing I was doing, both correctly and incorrectly. A decent trading journal will also help you in this pursuit and I will cover this topic later on.

Part 2 is continued tomorrow.

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Toni Hansen is President and Co-founder of the Bastiat Group, Inc., and runs the popular Trading From Main Street. She can be reached at Toni@tradingfrommainstreet.com.