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What is Trader? How to become a professional trader

More and more people are becoming traders and participating in the financial market in general and the cryptocurrency market in particular because of their popularity.

What is Trader?

Traders are people who make transactions and earn a profit from the price difference between buying and selling sessions of an asset. Trader is the term used to call all traders in any market such as stocks, forex, cryptocurrencies, foreign currencies, stocks… even ordinary gold and silver jewelry.

Traders are people who make transactions and earn a profit from the price difference between buying and selling sessions of an asset.
Traders are people who make transactions and earn a profit from the price difference between buying and selling sessions of an asset.

This is a job that requires high pressure, patience, extensive knowledge and experience, but at the same time it offers financial freedom, no time constraints and especially, can bring benefits. huge profit. This is considered the reason that this profession attracts so many people to join.

Read more: PART 1: What is Trader? How to become a professional trader

What is Trading?

If the trader is considered a subject, then trading is an action. Trading in English means trading or buying and selling. This is a term that refers to the main job of traders in the financial markets. Currently, instead of trying to profit from long-term trends in the market, traders will often look for short-term up and down price trends to get the most profit.

Opportunities and challenges of being a trader

Chance

  • Access to diverse investments: A trader’s job is very diverse. If you are a person with extensive financial knowledge, job opportunities will be many, such as brokerage floor staff, freelance investment, opening investment courses, investment consulting…
  • Freelance, unrestricted work: If you become a freelance investment trader, you are not constrained in terms of time and working space. Trading in the current 4.0 era does not require investors to be directly present at centralized exchanges as before. Instead, you can be at home or anywhere, making trades and analyzing market movements.
  • Be rubbed with financial knowledge: You do not have to come from financial disciplines to become a trader. Thanks to the practical experience, you can learn and improve your financial and investment knowledge.
  • High Profit Opportunity: If you have a lot of experience and knowledge in this field, you can make extremely high profits.
  • Embrace change quickly: A trader’s job is not just about investing. To invest well, in addition to the knowledge and skills of the market analysis, traders also have to update the latest news in all areas.

Challenge

  • The market has many potential risks: Investments around forex, cryptocurrencies, securities… always have many unforeseen risks. On exchanges, not all exchanges operate in a transparent manner. So if you are not really alert, it is easy for traders to get caught in the red and black trap without even knowing it.
  • Jobs that are not protected by law: In Vietnam today, there is still no protection and intervention by the law. Although it is still possible to participate, when there is a dispute, the trader will be most disadvantaged. The reason is because, they are not protected by the law, and can lose a lot of money if they participate in fraudulent exchanges.
  • Existing financial risks: It is not enough to have knowledge and experience to get the desired profit. The risks come from the system, not only traders but also companies and large investment funds cannot avoid heavy losses.
  • Requires a lot of analysis time: Actually, traders are not as leisurely as many people think. In order to trade effectively and profitably, a trader must really invest in research and analysis, including technical analysis, economic updates, political news, relevant financial reports. may affect the transaction.

Trader classification

Trader classification
Trader classification

Based on the subject of management

  • Self-invested traders: These are traders who will make their own trades, using and managing their own accounts. That means that profit or loss is entirely up to their ability.
  • Trader working for an individual or an organization: This form is similar to a salaried employee. Simply put, with this form, traders do not need to spend their own money to make transactions, but they are hired to make transactions with other individuals or organizations. The income of these traders is usually a commission or a hard salary.

Based on analytical style

  • Trader following the school of fundamental analysis: Usually this form is applied to new traders entering the market, trading is mainly based on the most basic factors of the market. These are investment traders based on the study and analysis of macroeconomic, political, and social factors of a country to assess the strength of that economy.
  • Traders follow the school of technical analysis: This is one of the styles favored by many traders. Here, trades will be made based on the analysis of trading techniques.
    Traders follow both schools: Experienced traders will often follow this style, the play that brings a lot of success to investors. Each school has its own advantages and disadvantages, so the combination of these two trading schools will synthesize more advantages.
  • Trader does not follow any school: This type of trader trades quite similar to the form of “lottery”. They do not understand the basic knowledge of trading but will execute the transaction according to their own wishes. Therefore, often this is also the main reason why many traders lose their accounts.

5 popular types of traders

Read more: PART 2: What is Trader? How to become a professional trader

Scalper traders are also known as scalpers. This group of traders is very large in the forex market, when each trade will be executed in just a few seconds to a few minutes. Trade orders are usually small in size but high in volume in the hope of making a profit from price movements in a short time.

Day trader

These are day traders, i.e. closing and opening all orders for the day. This form is not much different from the wave trading group, it is just that it has a slightly longer order execution time, from a few minutes to a few hours.

Swing trader

Swing trader
Swing trader

These are short-term traders. This group of traders holds trading positions longer than the above two forms, from 1 to several days. Based on technical analysis, trends, price patterns, they will decide to hold orders from one to several days.

This group makes up the majority of traders. They are people who have knowledge of the market, understand how to invest in this potential market and have a stable capital in order to avoid burning their accounts when the market plunges too quickly.

Position trader

This is a group of traders with extensive experience and large capital. Different from short-term trading, this group of traders trade long-term, they are interested in the fluctuations of the market by week, month, even year and can earn huge profits.

Insider trader

This term refers to traders who know a lot of important information, even before it is released to the market. Therefore, in trading, they often hold a greater advantage. However, if these traders use the above data to make a profit, causing the stock price to plummet, they may be tried and prosecuted for criminal liability.

Difference between trader and investor

Difference between trader and investor
Difference between trader and investor

Trader and investor are two terms that are often confused with each other. If considered carefully, these two concepts will represent two completely different schools of investment.

  • Trader: This term refers to a group of short-term traders. They trade continuously to make a quick profit from the price difference between buying and selling. Traders will often take advantage of short-term market fluctuations and then execute trading orders.
  • Investor: The term refers to a group of people who tend to invest for the long term. Investment assets they hold will often be more than traders. Investors rely on trading fundamentals, don’t care much about short-term volatility.

Looking at the cryptocurrency market today, you will see a stark difference between traders and investors. In a market where the price of Bitcoin and most other altcoins are falling simultaneously, traders will often sell off or wait for the price to rise and then sell immediately.

However, investors are different, they will not be in such a hurry, usually they will calmly hold coins and wait for them to reach their target price before selling. Coin holding period can last for a whole year or several years.

How to become a professional trader

Discipline

  • Emotion management: If you are always dominated by emotions while trading, it will lead to incorrect analysis and decision making. Please control your emotions well, always keep a cool head while trading for the best profit.
  • Risk management: Learn to anticipate all possible situations when trading, recognize when to decide whether to enter or exit an order.
  • Capital management: Always set the R:R ratio (Risk/Reward) for your account. If you have reached 1 of those 2 levels today, you should stop trading to continue the next day. Besides me, never use more than 50% of the capital for trading. In the trading account, an excess amount of capital must be left for risk management and market fluctuations.

Goals and plans

You need to set yourself clear goals and make a plan to accomplish those goals. Trading without a goal and plan will easily lead to burning that money.

Knowledge

Knowledge is the most solid foundation for you to trade with high profits. To invest, you need to learn and research concepts and knowledge in the market such as technical analysis, information selection…

Do not abuse trading excessively

This is a mistake that many inexperienced traders make very easily. They trade on a regular basis or in large volumes. If the market does not move as expected, the trader will suffer huge losses.

More specifically, when combined with financial leverage, the level of risk will be greater. Then your trade is like a gamble. Therefore, traders need to control over-trading and when the market is volatile, leverage should not be used.

Summary

Becoming a professional trader is not an easy process. Through the above article, CryptoWallCity has provided detailed information about traders and how to become a professional trader. Hope to bring you a lot of useful information.