Trading - what is it? How to become a trader and trade successfully?

Many today know or at least have heard that it is possible to earn on the purchase and sale of shares. And also that this opportunity is available to almost everyone, since there exists and actively develops Internet-trading. What is it and how will it help to earn an ordinary person, infinitely far from the financial sphere? In a general sense, trading is trading, and the trader is the person dealing with it. In the case we are considering, trading is understood as participation in trades organized by professional sites where certain instruments are traded (traded): stocks, bonds, fixed-term contracts or currency.

Who are traders?

Traders are called as traders in the market of professionals and amateurs. The first include employees of brokerage and investment companies, banks, dealing centers. These are people for whom trading is a job. The second group is a numerous and very diverse army of self-taught traders, although some "advanced" amateurs differ little from professionals.

Some traders trade securities on the exchange, others - currency in the international OTC market FOREX. Due to legal features, as well as the mechanism for organizing trades, a stock exchange for beginners is considered much safer than FOREX. Therefore, further we will consider exchange trading. What is it and how is it arranged?

Exchange trading

The Exchange is a company that organizes trades with certain instruments. It establishes the rules of trade and ensures that all participants fulfill them. Bonds and bonds, as well as fixed-term contracts (futures and options) may apply on the exchange. Those who make the first steps in trading, it is recommended to start with the simplest tools - shares.

To trade stocks, a future trader needs a broker. This is a company that organizes the connection of a trader to exchange trades and opens a trading account for him on the exchange. In order to track quotes and apply, the client will be provided with a special program (terminal or trading system). Trading is carried out by submitting orders to the exchange through this trading terminal. If the application is of interest to other bidders, then they will execute it, and the exchange will fix the transaction of purchase and sale. Despite a rather lengthy description, the whole process takes a few seconds.

How does a trader differ from an investor

Depending on the retention period, stock trading is divided into short-term and long-term. The latter is called investment, and those who deal with it are investors. These participants of exchange trades usually operate with rather large amounts. They conduct an in-depth market analysis, select the most promising companies and invest in the years. Investors expect not only to earn on the resale of shares, but also to receive income in the form of dividends.

Traders are commonly referred to as short-term traders. They pursue a single goal: to buy shares cheaper and sell more expensive. This type of trade is also called speculation. The trader does not care about the company's fundamental economic indicators and the growth potential of its shares in the long term. If today these stocks grow, then traders buy them. When they stop growing - traders will begin to close their positions.

It is customary to allocate intraday and positional trading. What it is? Intraday trading, or intraday, involves opening and closing positions on the same day. The trader does not want to leave the bought shares for the night period, when the exchange does not work, because at that time there can be different unfavorable events. Positional traders hold bought shares longer - from several days to several weeks, and sometimes months.

Systems approach

Trading stocks and other instruments involves following a set of rules. A good trader knows at any moment how he needs to act now, and what steps he will take in the event of developments on any possible scenario. The key to success in trading is system trading. What it is? Each trader should have a set of own trading rules or, as they say, the "trading system". Here are some of the basic rules:

1. Limitation of damages. It implies the need to clearly limit the amount of the maximum allowable loss in each transaction. For example, if as a result of the purchase of shares a loss of 5% is received, then the trader should recognize him and close the deal. Even if it seems to him that the price is about to "turn around".
2. Trade in the trend. Successful trading involves following a trend, not fighting it. If the stock price increases, you do not need to sell them in the expectation that it is about to start falling.
3. Understanding when you should not trade. If the trader is tired, has not slept well, is ill or simply unable to understand what is happening in the market, he should stay away from the terminal. Otherwise, the risk of making wrong decisions is high.

These are just some basic rules that will help a beginner trader to save capital at first. With experience, their list will expand, and trading will turn into a sequence of thoughtful actions.

Trading: reviews - believe it or not?

On the Internet, you can find many "success stories" of beginning traders who quickly made themselves fortune. In particular, this applies to trading on FOREX. These statements must be treated with caution. Most often they are the advertising of dealing centers that try to attract new customers. In any case, before you start trading in any market (stock or currency), you need to clearly understand the risk and the fact that the trader is responsible for his losses on his own.

It is believed that only 5% of newcomers succeed in the market. The rest lose their capital and leave trade - permanently or temporarily. What causes their defeat? Most often this is a misunderstanding of the psychology of the market, unsystematic trade and neglect of the basic rules. Few of the beginning traders understand that the decisive factor in the market is discipline. Experienced traders say that success is almost entirely based on the ability to control their emotions and think "cold" head.