From Beginner to Pro: The Complete Guide on What a Trader Is and How to Get Started

Do You Really Know What It Means to Be a Trader?

The word “trader” describes individuals or entities actively participating in financial markets, buying and selling various instruments such as currencies, cryptocurrencies, bonds, stocks, commodities, and derivatives. But here’s the important part: not everyone who trades is a professional trader. There are clear distinctions between the individual trader operating with their own capital, the investor seeking long-term profitability, and the broker acting as an intermediary.

Confusion among these roles is common, but understanding the differences is essential to know which category you fall into and what path to follow.

Trader vs Investor vs Broker: What Is the Real Difference?

The trader operates with their own resources aiming for short-term gains. They need to make quick decisions based on data, have high risk tolerance, and deeply understand market movements. Formal education is not mandatory, but practical experience is invaluable.

The investor, on the other hand, buys assets with the intention of holding them for months or years. Their approach is less speculative, requires less constant movement, but demands careful analysis of the financial health of their investments. The risk is typically lower than in trading.

The broker is the professional intermediary. They buy and sell on behalf of clients, must have a university degree, understand financial regulations thoroughly, and be licensed by competent authorities.

First Steps: How to Become a Trader from Scratch

If you have available capital and interest in the markets, here is the structured path:

1. Solid Financial Education

You don’t need a university degree, but you do need to read, study, and stay updated. Professional literature, financial news, analysis of technological trends: everything influences the markets. This foundation is not optional.

2. Understand How Markets Work

What makes prices go up and down? What is the real impact of economic news? How does collective psychology influence? These questions are at the heart of trading.

3. Define Your Personal Strategy

Based on your risk tolerance, your available time, and your knowledge, you should choose:

• Which assets to trade
• Which timeframes to operate in
• Your loss limits

4. Select a Regulated Platform

You need access to the markets. Look for a platform that offers a demo account (with virtual money to practice), risk management tools, and clear regulation.

5. Master Technical and Fundamental Analysis

Technical analysis: study charts, patterns, and price levels.
Fundamental analysis: examine economic data, corporate results, macroeconomic indicators.

Both are complementary tools, not enemies.

6. Risk Management: The Most Important Lesson

This is where the difference lies between traders who last and traders who disappear. Never invest more than you are willing to lose. Use tools such as:

• Stop Loss: automatically closes your position if it falls to a certain price, limiting damage
• Take Profit: secures gains by closing when you reach your target
• Trailing Stop: dynamically adjusts your stop loss as the market moves in your favor
• Diversification: don’t put everything into a single asset

What Assets Can a Trader Trade?

Options are broad:

Stocks: ownership parts in companies. Moderate-high volatility.

Bonds: debt instruments. Generally more stable.

Forex (Currency Trading): the largest and most liquid market in the world. Currency pairs fluctuate constantly.

Commodities: gold, oil, natural gas. Affected by geopolitical and climatic factors.

Stock Indices: represent the performance of multiple stocks (S&P 500, DAX, etc).

Contracts for Difference (CFDs): speculate on price movements without owning the asset. Offer leverage and the possibility to go short (profit when prices fall).

Different Trading Styles: Which One Is Yours?

Day Traders

Open and close positions within the same day. Typical assets: stocks, Forex, CFDs. Advantage: quick profits. Disadvantage: requires constant attention and generates high-volume commissions.

Scalpers

Perform dozens of trades daily seeking small but recurring gains. Ideal for CFDs and Forex. Demands extreme discipline and perfect risk management because small errors multiplied become large losses.

Momentum Traders

Capture strong trends in one direction. Look for assets with clear movement (CFDs, stocks, Forex). The challenge: identify the exact entry and exit points.

Swing Traders

Hold positions for days or weeks. Less time-consuming than day trading. Operate with CFDs, stocks, commodities. Higher risk due to exposure to market changes during nights and weekends.

Technical and Fundamental Traders

Base decisions on in-depth analysis. Can trade any asset. Offer valuable perspective but require advanced knowledge and precise interpretation.

Practical Example of Trading in Action

Imagine you are a momentum trader focused on the S&P 500 trading CFDs. The Federal Reserve announces an interest rate hike. Usually, stocks fall because companies will have less access to cheap credit.

You observe the immediate reaction: the index begins a downward trend. You decide to open a short position (sell) expecting it to continue falling.

To protect yourself:

• Stop Loss at 4,100 (if it rises to this level, close with a loss)
• Take Profit at 3,800 (if it drops to this level, secure profit)

You sell 10 contracts at 4,000. If the index drops to 3,800, profit is realized. If it rises to 4,100, loss is limited. This is how smart risk management works.

Uncomfortable Realities You Must Know

Trading sounds attractive, but statistics are harsh:

• Only 13% of day traders achieve consistent positive profitability over 6 months
• Less than 1% maintain gains for 5 years or more
• Almost 40% quit in the first month
• Only 13% persist after 3 years

Why? Emotions, lack of discipline, inadequate strategies, excessive leverage.

Current Trends: The Rise of Algorithmic Trading

60-75% of volume in developed financial markets is operated by automated algorithms. This presents opportunities and challenges for individual traders without access to cutting-edge technology.

Final Tips to Get Started

1. Educate Yourself First: don’t open an account until you have a solid foundation
2. Practice Without Real Money: use a demo account for at least 2-3 months
3. Start Small: when trading live, invest little
4. Keep Your Main Job: trading should be a complement, not a substitute
5. Record Every Trade: analyze what worked and what didn’t
6. Never Over-Leverage: it’s the main cause of ruin
7. Accept That You Will Lose: loss management is more important than gains

Frequently Asked Questions

How much money do I need to start trading?
It depends on the platform and asset. Some allow starting with $100-$500. The important thing is not to invest money you need for living.

Is it possible to trade part-time?
Absolutely. Many start trading a few hours after work. While it requires real dedication, it doesn’t have to be your main activity from the beginning.

What’s the difference between trading and investing?
The trader operates in the short term seeking price movements. The investor buys and waits for years. Different objectives, different risks.

Do I need specific training?
It’s not mandatory, but it’s critical. Some traders study on their own, others take courses. The reality is you will pay with education or with (losses).

Trading offers flexibility and profit potential, but it’s not a quick scheme for wealth. It’s a profession that requires skill, discipline, and the right mindset. If you’re considering starting, ask yourself: Am I willing to learn and fail before I succeed?