From Novice to Professional: The Complete Guide on What a Trader Is and How to Get Started in Trading

Trading represents a dynamic financial activity where individuals and entities trade various financial instruments: currencies, cryptocurrencies, bonds, stocks, derivatives, and mutual funds. Contrary to popular belief, being a trader does not require an obligatory university license, but it does demand a deep understanding of markets and rigorous risk management.

This article offers a comprehensive roadmap to understand what a trader is, differentiate this role from investors and brokers, and learn the essential steps to start trading from scratch. We will also explore the most effective strategies, risk management tools, and statistical realities of the sector.

Traders, Investors, and Brokers: What is the Difference?

In financial markets, there are three key roles that are often confused. Understanding them is fundamental to developing a coherent trading strategy.

The trader operates with their own resources, generally with short-term horizons and a focus on immediate returns. An effective trader masters financial data analysis and can make quick decisions under pressure. Volatility does not scare them; on the contrary, they leverage it. There is no formal academic barrier to entry, but practical experience and market knowledge are invaluable.

The investor, on the other hand, acquires assets with the intention of holding them long-term. Their analysis is deeper, examining the financial health of companies and macroeconomic conditions. The risk and volatility they face are significantly lower than those of a trader.

The broker acts as a professional intermediary. Buys and sells on behalf of clients, requires university academic training, comprehensive knowledge of financial regulations, and must be licensed by competent authorities.

Essential Steps: How to Become a Professional Trader from Zero

If you have available capital and are attracted by the possibility of surpassing traditional savings account yields, these are the mandatory steps:

1. Building a Solid Knowledge Base

The first step is to educate yourself. Dive into specialized economic literature, stay informed about financial and business news, and follow technological advances that directly impact markets. Ignorance is the number one enemy of the trader.

2. Deep Understanding of Market Mechanisms

How do markets actually operate? What factors generate price fluctuations? What role do economic news play? How does collective psychology influence? These questions must have clear answers before risking capital.

3. Developing a Personalized Trading Strategy

There is no single winning strategy. Your approach must align with your risk tolerance, financial goals, and available time. Define which assets you will trade and how you will identify entry and exit opportunities.

4. Choosing a Regulated Trading Platform

Open an account with an authorized and trustworthy broker. Ideally, look for platforms that offer demo accounts to practice without real risk before committing your capital.

5. Mastering Technical and Fundamental Analysis

Technical analysis examines charts and historical price patterns. Fundamental analysis studies underlying economic fundamentals. Both are vital for making informed investment decisions.

6. Implementing Rigorous Risk Management

Never invest more than you are willing to lose completely. Set loss limits (Stop Loss) and profit targets (Take Profit) on each trade. This discipline will separate surviving traders from those who disappear.

7. Constant Monitoring and Adaptation

Markets change continuously. Keep detailed track of your trades, analyze what worked and what didn’t, and adjust your strategy according to new market conditions.

8. Continuing Education

Trading is a constantly evolving field. Stay updated on new techniques, tools, and regulatory changes.

Asset Selection: What to Trade as a Trader?

Once the basics are established, you must decide which assets to operate in. The main options are:

Stocks: Represent ownership in companies. Their prices fluctuate based on corporate performance and general market conditions.

Bonds: Debt instruments issued by governments and corporations. The trader lends money in exchange for periodic interest.

Commodities: Essential goods like gold, oil, and natural gas. Their global demand generates constant liquidity.

Forex: The currency market is the largest and most liquid in the world. Traders buy and sell currency pairs, taking advantage of exchange rate fluctuations.

Stock Indices: Represent the collective performance of multiple stocks. They are used to track overall market or sector movements.

Contracts for Difference (CFDs): Allow speculation on price movements without owning the underlying asset. They offer flexibility, leverage access, and the ability to open long and short positions simultaneously.

Trading Styles: Identifying Your Profile as a Trader

Different traders operate with varying time horizons and strategies. Identifying which resonates with you is crucial:

Day Traders

Execute multiple trades daily, closing all positions before the session ends. This approach aims to capture quick gains by trading stocks, currencies, and CFDs. The downside: requires constant attention and generates high commissions based on volume.

Scalpers

Make dozens of trades daily seeking small but consistent profits. CFDs and Forex are ideal for this strategy, which leverages liquidity and volatility. The trade-off is that meticulous risk management is required; small errors multiply quickly.

Momentum Traders

Aim to capture gains by exploiting the directional inertia of markets. When they detect assets with strong, sustained movements, they enter in the direction of the trend. Works well with CFDs, stocks, and currencies, but demands precision to distinguish real trends from false alarms.

Swing Traders

Hold positions for days or weeks to benefit from price oscillations. Requires less dedication than day trading but faces additional risk from overnight and weekend changes. Typical assets include CFDs, stocks, and commodities.

Technical and Fundamental Traders

Base decisions on chart/pattern analysis or economic fundamentals studies. These methodologies provide valuable information but are complex and require solid financial knowledge.

Critical Risk Management Tools

Once the strategy is defined, implementing risk controls is non-negotiable:

Stop Loss: An order that automatically closes a position at a predetermined price, limiting potential losses.

Take Profit: An order that secures gains by closing the position when a target price is reached.

Trailing Stop: A dynamic stop loss that adjusts automatically as the market moves favorably, protecting gains while allowing growth.

Margin Call: An alert issued when the account margin falls below a threshold, indicating the need to close positions or deposit additional funds.

Diversification: Spreading capital across multiple assets to mitigate the impact of poor performance in any single position.

Practical Case: A Momentum Trader in Action

Imagine a momentum trader operating the S&P 500 index via CFDs. The Federal Reserve announces an interest rate hike, generally interpreted as negative for stocks (limits corporate borrowing).

The trader observes the market reacts immediately: the S&P 500 enters a clear downtrend. Anticipating continuation, they open a short position (sell) on S&P 500 CFDs.

To manage risks, they set:

• Stop Loss: 4,100 points (above current price, limiting losses if the market recovers)
• Take Profit: 3,800 points (below, securing gains if the decline continues)

They sell 10 contracts at 4,000 points. If the index drops to 3,800, the position closes automatically, consolidating gains. If it recovers to 4,100, it closes, limiting losses.

Statistical Realities of Professional Trading

It is crucial to understand the reality: trading is challenging, and most fail.

According to rigorous academic studies, only about 13% of day traders achieve consistent positive profitability over six months. Only about 1% generate sustained profits over five years or more. Nearly 40% of day traders quit in the first month, and only 13% persist after three years.

Simultaneously, markets are transforming. Algorithmic trading now accounts for between 60-75% of total volume in developed financial markets. This automation improves efficiency but increases volatility and poses challenges for individual traders without access to cutting-edge technology.

Conclusion: The Realistic Path of a Trader

Trading offers the potential for significant profitability and genuine flexible hours. However, it involves substantial risks. The fundamental advice: never invest more than you can afford to lose completely.

Consider trading as a secondary activity or supplementary income, while maintaining a primary job or solid income source. This combination protects your financial stability while exploring market opportunities.

The journey to becoming a successful trader requires rigorous education, emotional discipline, obsessive risk management, and patience. It is not quick or easy, but it is possible.

Frequently Asked Questions

How do I start my first trading operations?

First, educate yourself about financial markets and trading styles. Then, choose a regulated platform, open an account, and develop your personal trading strategy.

What characterizes a reliable trading broker?

A reliable broker offers transparent commissions, an intuitive trading platform, responsive customer service, and is regulated by recognized financial authorities.

Can I trade while working full-time?

Yes, many traders start this way. However, even part-time trading requires serious dedication and constant study to execute properly.