What is a trader? A trader is one of the most used words in the financial vocabulary. It seems straightforward: if you trade an asset, you can be called a trader. Still, not everyone who has ever tried market trading can be called a trader. The term has many hidden aspects. Let's figure them out. What is a trader? A trader is one of the most used words in the financial vocabulary. It seems straightforward: if you trade an asset, you can be called a trader. Still, not everyone who has ever tried market trading can be called a trader. The term has many hidden aspects. Let's figure them out.
Before we teach you how to become a trader, you should understand that there are two terms often used simultaneously: investor and trader. Where does the difference lie? An investor puts their money in an asset for an extended period and waits for the price to increase. Usually, investors open positions in one direction. If they own the security, they sell it. If not, they buy it and wait until the asset goes up to sell at its peak price.
A trader is a person who speculates on the asset's price.
A trader speculates on the asset's price. It's possible to both buy and sell an asset at once without owning it. The idea is to catch the market direction and trade according to it. The trader can open as many positions as their funds allow.
There are many classifications of traders. We'll start with independence.
Independence shows whether the trader operates on behalf of others or for a personal result. Trading on behalf of others. Some traders work on behalf of a client. They trade with the client's funds and take a commission for their service. Although they don't risk their money, they risk their reputation. Such traders should have solid experience and a high rate of well-executed trades. Usually, they work for an institution or company that owns enough money to enter the real market. Let us remind you that one standard lot equals €100,000.
Trading on behalf of others is the second step in your trading career that requires professional education, long-term experience and confirmed skills.
Independent trader. Some people trade on their own, only using the services of a broker that provides an online platform. In such a case, traders risk their own money, while anything their positions generate belongs to them. It can be your first step in a trading journey, where you gain enough experience before working for an institution. Still, many traders don't work for others - instead, they want to be in charge of their own funds and positions. In this article, we'll talk about them.
The next classification is the trading style. Traders use various timeframes, open and close trades differently. Their approaches to trading vary according to their purpose.
Traders use various types of market analysis to predict the price direction.
Many beginners ask how to become a trader. Fortunately, you don't need specific certifications, qualifications or equipment. But the situation might be different if you aren't going to work for a financial institution and present other people's interests.
Generally, all you need is:
A multiplier is the kind of fund support the broker offers to a trader to open more significant trades. It's not a loan, so the trader doesn't have to return the money.
Becoming a trader is just one step - the actual trading journey is much harder. Let’s go through the steps you’ll need to take.
Another crucial point we should talk about is trader psychology. You won't learn how to become a trader if you don't figure out the psychological factors that may affect your trades. It seems unnecessary, but many traders make mistakes because of the wrong psychological approach. There are many resources available that give tips on mastering your emotions while trading: for instance, “Trading Psychology: The Bible for Traders.” We’ve compiled some tips from trading psychology authors on which characteristics you should avoid when trading:
Only professional traders can use trailing Stop-Loss and Take-Profit orders. If you're a beginner, you may be too confident in your forecast and miss the moment when the market passes the return point.
No one can answer this question as trading isn't a job with a fixed salary. Your potential income depends on many factors. These include deposits, the asset you trade, the trading approach and the moment you enter and exit the market. However, your deposit affects the final results. For calculation purposes, we'll consider 0.01 lot size as the standard lot is €100,000, and this sum is too big for newbies.
If you want to start small, it's totally up to you - assess how much you can afford to lose and what your goals are.
Knowing what a trader is isn't enough to understand what pitfalls this role hides. If you're still unsure whether you're ready to be a trader, check the limitations and benefits first.
Win-win strategy. You can place sell and buy orders without owning the asset. It gives you much more flexibility.
Time. Markets fluctuate significantly. If you don't monitor the price for a long time, you could lose most of your funds.
Small funds. If we compare investing with trading, the latter requires smaller funds. No matter whether you trade currencies, cryptocurrencies, stocks (CFDs) or metals (CFDs), you can enter the market having only several dollars as online brokers provide multiplication.
Smaller gains. If you trade daily, you have a chance to earn the amount that will satisfy your expectations. However, profits may be followed by losses due to market volatility. Investing may provide higher rewards, but risks still exist.
Knowledge. If you want to be a trader, you need to constantly acquire new knowledge and analyze the market.
Please remember that if you want to place your trades efficiently, you should continually work on your skills.
Losses.Although market direction can be seen on the chart without special tools, many traders fail because of several factors. First, the market is highly volatile. If you trade within a short period, there are risks the market turns against you.
Second, many traders undervalue the importance of knowledge. Only by practising and learning daily can you achieve the desired results. Some traders choose to do so by practicing in a demo account.
Rapid rewards.Unlike investing, trading doesn’t take years. You can trade on minute timeframes and even see results within a day.
So, you've learned what a trader is. To become a trader, you don't need specific skills or equipment. Everyone who wants to trade can do so. However, it's not a game; it's a job that requires knowledge and a willingness to improve daily. Many good traders spend plenty of time reading educational materials and practicing in a demo account to gain knowledge and skills in a controlled environment.
Please note that trading CFDs with the multiplier can be risky and can lead to losing all of your invested capital. A Libertex demo account is the most comfortable way to begin your trading path. As soon as you feel confident enough, you can move to the real account. Libertex provides a wide range of assets, trading indicators, tight spreads.
Let's answer the most common questions about traders and trading.
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