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

What Is a Trader Really?

A trader is an individual or entity that actively participates in financial markets by buying and selling various instruments such as cryptocurrencies, currencies, stocks, bonds, commodities, and indices. Unlike traditional investors who hold their positions long-term, traders seek profitability through short- and medium-term price movements.

In financial markets, traders play a crucial role: they generate liquidity and enable prices to discover themselves efficiently. There are three key figures often confused: the (trader operating with their own resources seeking frequent gains), the (investor who buys to hold long-term), and the (broker acting as an intermediary on behalf of clients).

The Three Pillars Before Becoming a Trader

Financial Education: Your Solid Foundation

There is no formal requirement to be a trader, but ignorance is costly in the markets. You must understand how markets work, what moves prices, and how economic news impacts different assets. Stay updated on financial events, monetary policy changes, and technological developments affecting your target market.

Define Your Strategy and Assets

Based on your risk tolerance and available time, you need to choose:

• Which assets to trade: stocks, currencies (Forex), commodities, indices, or CFDs (CFDs)
• Trading style: day trading, scalping, momentum trading, or swing trading
• Time frame: intraday, short-term, or medium-term

Select a Regulated Platform

You will need access to an authorized and regulated trading platform. Look for brokers that offer demo accounts to practice without real money, reliable analysis tools, and robust risk management systems.

Types of Traders: Find Your Style

Day Traders: Execute multiple trades during the day, closing all positions before the session ends. They seek quick profits but require constant monitoring.

Scalpers: Make dozens or hundreds of trades daily aiming for small but consistent gains. They require extreme precision and meticulous risk management.

Momentum Traders: Capture gains by identifying assets with strong movements in one direction. The challenge is to correctly recognize the trend and know when to exit.

Swing Traders: Hold positions for days or weeks, taking advantage of price oscillations. They require less daily time but greater exposure to overnight and weekend changes.

Main Assets to Trade

The modern trader has multiple options:

• Stocks: Ownership shares in companies, fluctuate with performance and market conditions
• Forex: Currency market, the most liquid in the world, trading currency pairs
• Commodities: Gold, oil, natural gas, and other essential goods
• Indices: Represent the performance of groups of stocks, ideal for capturing broad market movements
• CFDs: Contracts that allow speculation on prices without owning the asset, offering flexibility and leverage access

Risk Management: The Difference Between Surviving and Thriving

Risk management is what separates consistent traders from those who disappear. Essential tools include:

Stop Loss: Automatically closes your position when the price falls to a predetermined level, limiting losses.

Take Profit: Secures gains by closing the position when your target price is reached.

Trailing Stop: A dynamic stop loss that adjusts as the price moves in your favor, protecting profits while allowing the position to grow.

Diversification: Don’t put all your resources into a single asset. Spread your capital across different instruments to mitigate the impact of individual losses.

Percentage Rule: Never risk more than 1-2% of your account on a single trade.

Practical Case: Momentum Trading in Action

Imagine you are a momentum trader observing the S&P 500 index via CFDs. The monetary authority announces an interest rate hike, which typically harms stocks by making corporate debt more expensive.

You see the market reacts immediately and the S&P 500 drops sharply. Anticipating that this bearish trend will continue short-term, you open a short position (sell) on 10 contracts of the S&P 500 at 4,000 points.

To protect yourself, you set:

• Stop Loss at 4,100: If you’re wrong and the market rises, your losses are limited
• Take Profit at 3,800: If you’re right and the market falls, your gains are automatically secured

If the index drops to 3,800, you profit. If it rises to 4,100, you lose but in a controlled manner. That’s how professional trading works: profitability with protection.

The Harsh Reality: Statistics You Must Know

Here comes the uncomfortable part: trading is not easy. The statistics are discouraging but informative:

• Only about 13% of day traders achieve consistent positive returns over six months
• Only about 1% generate sustainable profits after five years
• Nearly 40% of day traders quit in the first month
• Only about 13% persist after three years

Additionally, the market is changing. Algorithmic trading accounts for between 60-75% of total volume in developed markets, increasing volatility and making things more challenging for individual traders.

Practical Tips to Get Started

1. Open a demo account: Practice without real money until you master the tools and your strategy
2. Start small: When you move to real money, trade minimal amounts while gaining experience
3. Keep trading as a secondary activity: Until you prove consistency, don’t rely on trading as your main income
4. Continuously study: Markets evolve, and so should you
5. Maintain a trading journal: Record each trade to identify patterns in your successes and failures
6. Don’t risk capital you need: Only invest money you can afford to lose

Conclusion

A trader is someone who understands that markets offer opportunities, but also carry significant risks. The difference between a successful trader and one who loses money lies in education, disciplined strategy, rigorous risk management, and constant adaptability.

If you have available capital, genuine interest in markets, and willingness to learn, trading can be a legitimate source of income. But do it realistically: it’s an activity that requires dedication, humility to learn from mistakes, and the wisdom to know when to stop.

Trading is not a shortcut to get rich; it’s a skill built with patience and discipline.