What is a Trader? What does its activity consist of? What characteristics distinguish him from the investor? How to become a trader? From the choice of stock broker to the development of a trading plan, including the use of stock market tools, Café de la Bourse goes back over the fundamentals and presents its advice to you to become a better stock market trader.Discover the pitfalls to avoid, our profile of the best traders and our selection of trading training for anyone wishing to become a stock market trader.Also find in this file our broker comparison, our video 10 tips for starting online trading, as well as our ebook 81 tips for investing in the stock market.
What is a Trader?
Trader and investor: what are the differences between these market players?
You might be wondering what is a trader? What is trading? And above all, what are the differences between trading and investing? A trader is a person who buys and sells financial products on the financial markets. To trade is therefore to position oneself on financial assets with the aim of realizing a capital gain at the time of resale. In this sense, a trader is, for example, different from a financial analyst whose job is to carry out studies of companies listed on the stock exchange and to monitor macro-economic news, in particular in order to advise traders and portfolio managers.
The trader differs from the investor by the duration of his position.
While investors are generally positioned for the long term, traders often favor short-to-medium-term gains. Some, moreover, only hold their positions for a few seconds to a few minutes, or for only a few hours.There are also robot traders that allow you to practice algorithmic trading. This is systematic trading (buy and sell orders are based on algorithms) as opposed to discretionary trading (buy and sell orders are based on the decision of the trader executing the order).Automated trading may concern the individual investor who will then invest via a robot trader. But it is above all the result of financial institutions (banks, management companies and hedge funds) which practice it on a large scale: this is what is called high-frequency trading . This form of trading makes it possible to generate profits through millions of automated micro transactions.
Salaried trader and independent trader:?
Trader, is it a profession? Yes of course ! But be aware that there are two types of traders: the salaried trader and the independent trader.The salaried trader is a market operator, working for a banking establishment, whose salary is fixed and who also receives a bonus linked to his earnings but depending on the goodwill of his hierarchy.The independent trader, who trades for his own account (it is often called a proprietary trader), works for himself and his income corresponds to his earnings. He does not receive a salary since he is self-employed.
There are therefore several trader statuses that cover very different realities.
In this article, we will focus on presenting the activity of own account trading and detailing the best practices to put in place when you want to become an independent trader.You do not want to go that far and want to keep another professional activity but you are wondering how to trade when you are working? It’s more complicated but quite possible too. It will only require more organization and will partly determine your trading style and the assets traded. It will be easier to trade Forex in the evening than scalping stocks in the middle of the morning if you have a busy job.
There are nearly 15,000 retail traders in France according to a study by the AMF on retail investors on CFD and Forex trading in France , carried out between 2009 and 2013. If we count Stock Exchange trading and raw materials, and the trading of derivatives other than CFDs, there are probably tens of thousands of people in France who engage in the practice of trading. However, it is very often a complementary activity or a hobby. Few independent traders make a living from trading. There are no more than a few hundred in France, according to a survey by Les Echos of retail traders in France .
How much does an independent trader who manages to live off his earnings earn? The amount varies greatly depending on the initial investment amount but with a capital of 100,000 euros, it is not impossible to earn 5,000 euros per month. With 10,000 euros of investment and using a little more leverage, the income will be more in the order of 1,000 euros per month. However, this can be enough to build up a nest egg by keeping your main activity in order to then have sufficient capital to devote yourself completely to your activity as an independent trader.