Who is a trader

Traders can work for a bank or investment company. These are less interesting market participants to us. Their main job is to perform large buy or sell orders of large customers. Sometimes they also participate in the management of the company's investment portfolio: they may make transactions as decided by a special investment committee. There are many clear tasks and bureaucracy in the life of a bank trader. And there is little space for "creativity" in it. Such traders live on wages and bonuses.

Traders who work for themselves or for the so-called “prop-trading company” are much more interesting.

For your information: prop trading centers provide capital for beginners and experienced traders to trade, provide a place of work, train newcomers and monitor their results. In return, the traders share their profits with the company.

Such traders can be called very skillful speculators with a clear trading strategy. They are real exchange professionals. They devote 100% of their time to the market and live on the income received from their securities transactions.

It is possible to divide "self-employed" traders into three groups, according to the frequency, number and timing of transactions:

1.     Scalpers catch price fluctuations. They can make dozens or even hundreds of transactions per day. One scalper trade can take literally a few seconds or minutes.

The scalper takes 2-5 cents in each trade for a very large position value. He believes it is a lot and too good to take 10-20 cents per share in a transaction. The scalpers look for oft recurring situations on the market that can be dealt without much thinking, as “mechanically” as possible.

The scalpers trade based on technical analysis. And with the help of special tools, they "read" the balance of supply and demand in real time and look at the flow of transactions.

2.     Intraday-traders  make 4 to 8 trades per day. They take from 30-50 cents to several dollars per share in every action. They trade in smaller volumes than scalpers. Each trade lasts from a few minutes to several hours. Intraday-traders have a clear schedule of the day and know when to be more active and when to take a break. It is extremely rare to leave open positions for the next day; they fix profits or losses before the close of trading. They start the next trading session from scratch.

They make decisions based on analysis of charts and transaction flow. They also study the market and companies news background.

3.     Swing-traders held shares from several days to several weeks or even months. They are more tough in fundamental analysis. They combine it with the technical one.

General characteristics of "self-employed" traders:

• They prioritize the risk/reward ratio. In each trade, the trader seeks to earn at least two or three times amount he is risking.
• They have a clear risk management system. Basically, it consists in setting a predetermined loss limit for the day and for each trade. Losing trades are closed in cold blood and without thinking. when the daily limit is reached, the trading is stopped.
• They know that statistics are important for every strategy. It is necessary to complete at least 100 same type transactions and only after that make conclusions about the viability of the approach.
• The traders analyze their results. They try to build on strengths and get rid of non-workable or harmful actions.
• They run the gamut gradually to a stable income. First, they lose money for several months ... Then they lose less ... They close the month at zero ... Close the month with a slight plus ... Gradually they begin to earn more and more stable. Generally, this way takes from 8 months to 1.5 years.

So, who is a trader?

This is a person who understands: to achieve success in this profession is tantamount to the likelihood of becoming a world sports star. A person who is ready to spend two hours five days a week preparing for the trades, two hours for analyzing successful and failed transactions, and another 6.5 hours for the trades itself. And then look for ideas and analyze actions on the weekends.

Over a long enough distance, this is a profession for very few. But sometimes these few become millionaires. And yet, over time, even successful traders try to increase the time horizon of their transactions and turn into investors.

Being a trader means:

• Spend a significant part of life at hard work at the computer;
• Sometimes go through psychological difficulties, when series of unprofitable days or months begins;
• Even after several successful years, face the constant need to adapt to market changes;
• On a long enough distance, to realize possibility to build much more capital with less time and effort, through gradual long-term investments.