From Beginner to Operator: Everything You Need to Know About What Trading Is and How to Get Started

▶ Realities of Trading: Is It Worth It?

Before diving into the world of trading, it is crucial to understand the statistics. According to academic research, only 13% of day traders achieve consistent positive profitability over six months. Even more discouraging: just 1% maintain sustained gains over five years. Nearly 40% of traders give up in the first month, and only 13% persist after three years.

But here’s the interesting part: the market evolves. Algorithmic trading now accounts for between 60-75% of total trading volume in developed markets. This means individual traders compete not only with other humans but with sophisticated machines.

The most important lesson: trading offers flexibility and profit potential, but should be viewed as a secondary activity, never as a primary income source.

▶ What is Trading? Simplified Definition

Trading is the buying and selling of financial instruments aiming to generate short-term profits. But the full answer is more nuanced.

A trader is an individual or institution that actively trades various assets: cryptocurrencies, currencies, stocks, bonds, commodities, or derivatives. The key differentiator is the time horizon. While an investor buys and holds assets for years expecting long-term returns, a trader enters and exits positions within hours, days, or weeks.

Key Differences: Trader vs Investor vs Broker

These three terms are often confused, but they are distinct:

The Trader: Operates with own resources, makes quick decisions based on data analysis, requires high risk tolerance. No mandatory academic background, but practical experience and deep market knowledge are essential.

The Investor: Acquires assets holding long positions, seeks long-term growth, requires fundamental analysis of companies and macroeconomic conditions. Their risk is lower than that of a trader.

The Broker: Is an intermediary. Buys and sells on behalf of clients, needs regulatory license, university education, and a thorough understanding of financial regulations. It’s the professional version used by those who prefer to delegate management.

▶ Essential Steps to Become a Trader from Zero

1. Acquiring Financial Knowledge

It’s not just about reading a guide. You need a solid foundation in economics, markets, and financial analysis. Study professional literature, stay updated with economic news, observe how technological or political events impact price movements.

2. Understanding Market Dynamics

Understand what drives price fluctuations. Market psychology is as important as economic fundamentals. Learn why prices go up or down, how economic news triggers chain reactions, and the role investor sentiment plays.

3. Developing Strategy and Asset Selection

Define your own strategy. Will you trade stocks, Forex, cryptocurrencies, or CFDs? Your choice should align with your risk tolerance, financial goals, and available time to monitor positions.

4. Opening an Account on a Regulated Platform

Access markets through a reliable and regulated platform. Many offer demo accounts to practice without risking real capital, which is invaluable for developing skills before trading with your own money.

5. Mastering Technical and Fundamental Analysis

Both are vital. Technical analysis examines charts and price patterns. Fundamental analysis studies the financial health of companies, economic indicators, and valuations. Combined, they give a comprehensive view for informed decision-making.

6. Rigorous Risk Management

Never invest more than you’re willing to lose. Set loss limits, use protective tools like Stop Loss. This discipline is the difference between traders who endure and those who disappear.

7. Constant Monitoring and Adaptation

Markets change. Your strategies must also evolve. Monitor trades, adjust tactics according to new conditions, and continuously review your performance.

▶ Assets You Can Trade as a Trader

Once you master the basics, what can you trade?

Stocks: Represent ownership in companies. Prices fluctuate based on company performance and overall market conditions.

Bonds: Debt instruments. When you buy, you lend money to governments or corporations in exchange for periodic interest.

Commodities: Gold, oil, natural gas. Tangible assets with constant global demand.

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

Stock Indices: Represent the performance of groups of stocks. Allow tracking the performance of entire markets or sectors.

CFDs (CFDs): Derivative instruments that allow speculation on price movements without owning the underlying assets. They offer leverage, flexible access, and the ability to open long or short positions.

▶ Types of Traders: Which One Are You?

Understanding trading styles is essential to develop a consistent strategy. Each type has its own characteristics, advantages, and disadvantages:

Day Traders: Execute multiple trades within the day, closing all positions before the session ends. Seek quick profits in stocks, Forex, or CFDs. The appeal is immediate profitability, but it requires constant attention and generates high commissions based on volume.

Scalpers: Make a large number of trades aiming for small but consistent gains. Benefit from liquidity and volatility. CFDs and Forex are ideal. The downside: requires full concentration and meticulous risk management, as small errors across hundreds of trades can lead to significant losses.

Momentum Traders: Capture gains by exploiting market inertia, trading assets showing strong movements in one direction. CFDs, stocks, and Forex are their preferred instruments. The challenge: precisely identifying trends and knowing when to enter and exit.

Swing Traders: Hold positions for several days or weeks, taking advantage of price oscillations. Trade CFDs, stocks, and commodities. Offer significant returns with less time commitment than day trading or scalping. The risk: exposure to market changes overnight and on weekends.

Technical and Fundamental Traders: Rely on technical analysis, fundamental analysis, or both to decide trades. Trade all types of assets. These strategies provide valuable insights but can be complex, requiring a high level of financial knowledge.

▶ Risk Management Tools: Your Protective Shield

Once your strategy is defined, applying effective risk management is non-negotiable. The tools available on regulated platforms include:

Stop Loss: An order that limits losses by closing the position at a specified price. Your emergency parachute.

Take Profit: Secures gains by closing the position when the target price is reached. Prevents greed from eroding profits.

Trailing Stop: A dynamic stop loss that adjusts to favorable market movements, capturing gains while protecting your capital.

Margin Call: Alert when account margin falls below a threshold, indicating you should close positions or add funds. Prevents unpleasant surprises.

Diversification: Investing in various assets mitigates the impact of poor performance in any single position. Don’t put all your eggs in one basket.

▶ Practical Case: Momentum Trading with CFDs

Imagine you are a momentum trader focused on the S&P 500 trading via CFDs.

The Federal Reserve announces an increase in interest rates. Markets interpret this negatively: it limits borrowing capacity and corporate expansion. The S&P 500 begins a downward trend.

Anticipating the persistence of the short-term decline, you open a short position in S&P 500 CFDs to profit from the downward movement. You set a Stop Loss above the current price to protect yourself if the market recovers. You set a Take Profit below to secure gains if it continues falling.

You sell 10 contracts at 4,000. Stop Loss set at 4,100, Take Profit at 3,800.

If the index drops to 3,800, the position closes automatically, capitalizing gains. If it rises to 4,100, it closes, limiting losses. In both cases, your risk was controlled before executing.

▶ Frequently Asked Questions About What Is Trading

How do I start trading?

First, educate yourself about financial markets and available trading types. Then choose a regulated platform, open an account, and develop a strategy. Consider using a demo account initially.

What features should a trading broker have?

Look for clear regulation, competitive commissions, an intuitive platform, good customer service, and access to a variety of assets. Regulation is non-negotiable.

Can I trade part-time?

Yes, many traders start trading in their free time while maintaining a main job. It requires dedication and study, but it’s feasible. In fact, maintaining a primary income source is recommended for financial stability.

▶ Final Reflection: Trading as a Complement, Not a Solution

Trading offers real opportunities but involves significant risks. Most new traders lose money. The statistics are clear: perseverance, knowledge, and discipline separate the 13% who achieve consistent profitability from the remaining 87%.

The key is to see it as a supplementary activity that generates additional income, never as a substitute for stable employment. Maintaining a primary income source is essential to protect your financial stability while developing skills in the markets.

The future of trading is being shaped by algorithms and machines. But this doesn’t mean individual traders are doomed. It means they need higher education, stricter discipline, and constant adaptability to compete in this new landscape.

Are you ready for this challenge?