What is a trader & what does he do? | Definition & Explanation (2024)

A trader is a person who carries out exchange transactions on the financial markets. By buying and selling assets, the trader assumes risk in order to generate profits.A trader either trades out of pure speculation or has an economic interest. A wide variety of financial products are used for this.

What do traders trade:

  • Tradingworks with numerous markets
  • Shares, indices (Dax, S&P500 etc.)
  • Commodities (gold, oil, wheat, etc.)
  • ETFs(For long-term investments)
  • Currencies/Forex(Euro, USD, Yen, etc.)
  • Government bonds
  • Cryptocurrencies
What is a trader & what does he do? | Definition & Explanation (1)

Do you want to know more about the mysterious job trader? – Then you have come to the right place!I will give you an insight into trading methods and opportunities on the stock market. With over 7 years of experience in the financial markets, I can explain to you exactly what 4 things you need to become a successful trader.

Advantage of speculators

Traders/speculators bring more liquidity to the stock exchange and can, for example, assume risks. This is an advantage for all stock market participants.

How to Become a Trader? – Institutional vs. private

In general, anyone who trades on the stock market can call themselves a “trader”. From my experience, traditional training or a degree will not be of much help to you in this career. There are very few universities that specialize in the topic. For example, buy oneshareand by selling them at a profit you can immediately call yourself a “trader”.

There are two ways to become a successful trader. I will explain these to you shortly. These 2 options usually result in 2 different groups of traders.

Dealer classes:

  • Become a private trader:You train with other private traders and find the right information for your trading style.
  • Become an institutional trader:You apply to a major bank, hedge fund or trading firm (very few people have a chance of applying here).

The difference between a private and an institutional trader:

Private:Institutional:
Trades with your own moneyTrades with borrowed capital
Is independentIs employed
Keeps all winningsMay not keep all winnings
Often trades with small capitalTrades with large capital and positions
Gets bonuses for profits

My tip: Trade over 3,500 different markets at low fees:

Open a trading account at Capital.com now(Risk warning: 79% of private CFD accounts lose money)

What are the tasks of a stock market trader (trader)?

As mentioned above, there are different tasks of a trader. The trader does not always trade for himself. In the following points I would like to explain the tasks to you. This is also important, among other things, for understanding the markets.

Market Maker

The trader provides liquidity in the market at a certain price. There always have to be two sides to the market. There is always a seller and a buyer (or more) at a price. For example, a company wants to open a large position on the stock market so that it can hedge against price fluctuations. However, the market does not have enough liquidity at the company's desired price. A bank is commissioned to take the other side of the transaction and thus carry out the company's position. The trader assumes the risk and is compensated with a commission.

  • TheMarket Makerprovides liquidity for other institutions

Proprietary trading and market influence

In many cases, large institutions trade with a lot of money, so they can easily influence the market on their own. It is downright difficult for these institutions to build up positions because they lack the necessary liquidity. Skilled traders influence the market so that they can open large positions. Most of the time, the stop losses from other traders are needed for this. Other traders are forced to close out their positions. Through various analyzes you can find out in which areas many stop losses are located. The market is driven specifically to these prices in order to use the resulting liquidity for its own positions.

My tip: Trade over 3,500 different markets at low fees:

Open a trading account at Capital.com now(Risk warning: 79% of private CFD accounts lose money)

You should master these 4 things as a trader:

With more than 7 years of experience, I can tell you the main points why many traders fail. You can still do the bestTrading StrategyThis will be of no use to you if you do not have the following qualities. To achieve lasting success, learn the following points:

1. Discipline:

You have to be as disciplined in stock trading as in any other job. In which job can you allow yourself to make serious mistakes? On the stock market you have to pay for your mistakes with capital because the market punishes you. Without discipline you will not be successful!

2. Don't be afraid:

For too many traders, fear prevents them from succeeding. When it comes to trading with real money, most newbies get scared to open a position. Fear is not a good guide in the market.

3. Concentration:

At theTradingFrom my experience, you need the highest level of concentration! Never allow yourself to be distracted by cell phones, websites or other traders' opinions. You have to dominate the market independently to make money.

4. Fixed set of rules:

For theTradingYou need a fixed set of rules or a trading plan in which you are prepared for all scenarios.Tradingis a combination of being disciplined and following rules.

Which software and platform do private traders use?

There is almost an oversupply of trading platforms on the Internet. I have already compared many providers and picked the best. Unfortunately, there are also providers with poor conditions for retailers. That's why you should do careful research when choosing a broker. In the points below I have summarized which features a reputable broker needs.

In the past, positions had to be opened by telephone, but today it is very easy to open via an online platform.

Private traders trade 90% with Forex and CFD brokers:

  1. To the Forex broker comparison
  2. For the CFD broker comparison

Reputable brokers should have these qualities:

  • Regulation and licensing by an official financial regulator
  • Free demo account to test the software
  • Good & fast execution of trades
  • Direct German contact (support)
  • User-friendly trading platform
  • Small fees and no hidden costs

My tip: Never trade at expensive fees with the best brokers again:

Broker:

Advantages:

Evaluation:

The offer:

Broker:

What is a trader & what does he do? | Definition & Explanation (2)

Advantages:

  • Large selection of trading instruments
  • Leverage up to 1:30
  • Multiple regulation
  • Spreads from 0.2 pips without commissions
  • TradingView connection

Evaluation:

12345

5.0/5

The offer:

Register now(Risk warning: 79% of private CFD accounts lose money)

Broker:

What is a trader & what does he do? | Definition & Explanation (3)

Advantages:

  • Most user-friendly platform
  • Regulated in Germany (BaFin)
  • Branch in Frankfurt
  • Large selection of markets and financial products
  • Cheap fees

Evaluation:

12345

5.0/5

The offer:

Register now(Risk warning:78% of retail investor accounts lose money when trading CFDs with this provider)

Broker:

What is a trader & what does he do? | Definition & Explanation (4)

Advantages:

  • Best for Forex
  • Branch in DE
  • Spreads ab 0,0 Pips
  • Fast execution ECN/STP
  • Personal support

Evaluation:

12345

5.0/5

The offer:

Register now(Risk warning: 70.37% of private accounts lose)

A notice:

On this site I recommend good and tested brokers, which I have been using myself for several years. You can test the platform directly with a free demo account and start trading online.

How much starting capital is it possible to trade with?

Nowadays you can start trading with a minimum deposit of €10.The minimum stakes per trade are €1. Thanks to progress and intelligent software, anyone interested can now take part in the markets. So you only need a minimal oneStarting capital.

How much money does a trader make?

A trader can make as much money as he wants. The performance and the hit rate just have to be correspondingly high. In theTradingthe principle applies:“The greater the risk, the greater the potential reward.”

High profits can be made in a short period of time. It always just depends on the amount of the stake. Many newbies think that trading will help you get rich quick. This is usually not the case because you forget it is a lot of work.

My trading experiences and conclusion on the topic:

On this page I have given you a detailed insight into the world of the stock market trader.You can find more information on my other pages.

Traders in the financial markets can earn a lot of money, but it takes years of work to educate themselves and understand the market. This may be the best job in the world because you get paid based on your performance and work without a boss. However, this topic is not an option for people who are not willing to take risks. As a trader, you have to take risk in the markets in order to make any profits.

From my experience, you should start with small stakes first and then slowly increase the risk later.

My tip: Trade over 3,500 different markets at low fees:

Open a trading account at Capital.com now(Risk warning: 79% of private CFD accounts lose money)

Most frequently asked questions about traders:

What do you do as a trader?

As a trader, you trade financial products and assets on the financial markets. The strategies can vary. For example, there are traders who limit themselves to executing positions for large institutions and receive a fixed salary for this. Other traders only trade for themselves or trade with outside capital and thereby receive commissions.

Is trading a profession?

It is possible to work as a trader. But only very few people can do this. You have to be extremely good to work at a company or hedge fund. General training to become a trader is not often available. You can only get such training in large investment banks or hedge funds.

What is a trading company?

A trading company employs traders who trade with the company's capital. This can be debt or equity. The trader receives a share of the profits or commissions for trades made.

Can anyone become a trader?

Yes, anyone who has sufficient starting capital and internet access can become a trader. All you need to do is register with a licensed broker and deposit funds into your trading account and you can start trading.

I bring over 7 years of hands-on experience in the financial markets, specializing in trading across various assets. My expertise spans equities, indices (such as Dax, S&P500), commodities (Gold, Oil, Wheat), ETFs (for long-term investments), currencies/forex (Euro, USD, Yen), government bonds, and cryptocurrencies. With a focus on both speculative trading and economic interests, I've navigated through different market scenarios.

Let's delve into the concepts covered in the provided article about trading:

  1. Trader's Role and Risk-Taking:

    • Traders engage in exchange transactions in financial markets.
    • They assume risks by buying and selling assets to generate profits.
    • Trading involves various financial products.
  2. Markets Traded by Traders:

    • Equities
    • Indices (e.g., Dax, S&P500)
    • Commodities (Gold, Oil, Wheat)
    • ETFs for long-term investments
    • Currencies/Forex (Euro, USD, Yen)
    • Government Bonds
    • Cryptocurrencies
  3. Becoming a Successful Trader:

    • Two paths: Private Trader or Institutional Trader (working for a bank, hedge fund, or trading firm).
    • Private traders trade with their own capital, while institutional traders use external capital.
    • Distinctions in capital size, autonomy, and profit distribution.
  4. Tasks of a Trader (Börsenhändler):

    • Market Maker: Provides liquidity in the market at a specific price, facilitating transactions.
    • Own Trading and Market Influence: Skilled traders influence markets, leveraging stop-loss orders to build positions.
  5. Qualities Essential for Traders:

    • Discipline: Essential for success, as the market penalizes mistakes.
    • Fearlessness: Overcoming fear is crucial for trading with real money.
    • Concentration: High levels of focus are necessary for successful trading.
    • Defined Rule Set: A trading plan is essential to navigate various market scenarios.
  6. Software and Platforms for Private Traders:

    • Wide variety of trading platforms available online.
    • Criteria for choosing a broker, including regulation, demo accounts, execution speed, support, and user-friendly platforms.
  7. Minimum Capital for Trading:

    • Trading can start with a minimum deposit of €10.
    • Minimum trade amounts around €1.
  8. Earnings Potential for Traders:

    • Earnings are not capped, dependent on performance and accuracy.
    • Emphasizes the relationship between risk and potential profit.
  9. Trader's Experience and Conclusion:

    • Acknowledges the potential for significant earnings but highlights the need for continuous learning and understanding the market.
    • Recommends starting with small stakes and gradually increasing risk.
  10. FAQs about Traders:

    • Describes the role of a trader.
    • Notes the rarity of becoming a professional trader without extensive skill.
    • Defines a trading firm and its operations.
    • Affirms that anyone with sufficient capital and internet access can become a trader.

Feel free to ask if you have specific questions or if there's a particular aspect you'd like to explore further.

What is a trader & what does he do? | Definition & Explanation (2024)

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