How to make money on the stock exchange: What is the taste of a trader’s craft?

Kirill Grishin

How to become a cool stockist from scratch? Where to start? How much knowledge? How do I choose a mentor? And as a result, how to professionally make money on fluctuations in the stock, currency and commodity markets? All this gives our insight into the profession of a trader.

Description of the profession: a trader is…

A trader makes transactions for the purchase and sale of currency, precious metals or shares on the market. Earns on the price difference. It is very interesting to play on the foreign exchange or stock market. However, this requires good knowledge, analytical skills and self-control. The profession of a trader requires daily work on yourself.

The history of the emergence of the profession and the present

The profession of a trader, if you look closely, is ancient. It goes back to the days of street trading, when its representatives received the main income from resale. The first exchange in Russia was created by Peter the Great in St. Petersburg in 1703. As of 1923, there were seventy of them. Until 1930, there was a brisk trade. Then this type of activity was banned.

The exchange market in our country began to revive in 1991. But it was still out of reach for small investors. Also, the over-the-counter market for private individuals has not yet been formed. The date of the beginning of the history of the well-known Forex market in Russia can be considered 1994. But private investors still did not have access to it. The rapid development of exchange trading took place in the 2000s. The promotion and cheapening of the Internet, as well as the emergence of quite accessible platforms, contributed to this.

Who is a trader?

A trader is a stock exchange trader who sells or buys securities, bonds, stocks, futures. Most traders are employees and trade with employers’ funds. These are professional market participants working for banks, investment companies, pension funds, and so on. They receive a percentage of the profit from transactions as a reward. In this case, all risks fall on the employer. A trader only risks his reputation. This work requires a special license. In Russia, it is issued by the Central Bank. You usually don’t need a license to trade with your own funds. In this case, the trader acts at his own peril and risk.

Difference between broker, investor and trader

The broker is a licensed intermediary between the trader and the market, he does not make decisions for the trader, but simply follows the instructions received. Brokerage is strictly regulated and monitored by regulatory agencies in the countries.

An investor is engaged in investing his money in securities. Its profit is made up of the rise in prices and the dividends received during the investment. He usually invests in stocks for a long-term period – from a year or more. The profitability of such investments is lower compared to trading. This is due to the fact that the investor makes much fewer transactions than the trader. An investor, by the way, does not need a license without fail.

The stock market trader buys and sells financial assets. Its ultimate goal, of course, is making a profit. A trader monitors price fluctuations in the stock market in real time and can specialize in one or more financial markets. It can trade Forex currency pairs, commodities, or even cryptocurrencies.

A trader can be an employee of, for example, a bank or work independently. The difference in the work of a trader and an investor in an interview with Sputnik radio was explained by the managing director of the MC “Finam Management” Nikolay Solabuto.

“A trader makes transactions quite often. You need to understand the difference – investors make one mistake every 15 years. A trader during this time can make thousands of transactions. Traders are all those players who make a transaction at least once a year. we have such a term “active client” who makes a deal at least once a year. By this we mean both opening a deal and closing a deal, it will be a full cycle. If this is opening positions, buying some shares, then selling of these shares on the stock exchange, so if a person completes this full cycle in less than one year, then he is considered a trader. And sometimes it happens that a person makes 100-150 transactions in one hour. In general, a trader is a rather broad concept, ” – said Nikolai Solabuto.

Trading has a more accessible explanation. This is, for example, when you buy a commodity in order to capitalize on the change in its price. You take, conditionally, one security for 1000 rubles, and sell, conditionally, in a month for 1500. And this is logical, because you want to make money on it. Only here some can reproach you that you are not engaged in trading, but in speculation, that is, in short-term investments, says Evgeny Kogan, a financier, HSE professor, investment banker, author of the bitkogan Telegram channel, in an interview with Sputnik radio:

“Trading is, in fact, a form of speculation, and there is a long-term investment, which, to be honest, we adhere more. Although there are no exceptions to the rules. Well, for example, you have successfully taken some security, and tomorrow it grows by 5, 10 or 20%, you can close the position and be happy, well, you were like an investor, but you became a speculator, well, thank God. “

How to start trading?

Complete training. A variety of non-free trading courses can be found online. General collections with training programs for all instruments: securities, currencies, futures contracts, etc. You need to choose the one that is offered by a licensed (from the Central Bank of the Russian Federation) organization with extensive experience. You need to carefully read the biography of the mentor, he must be an experienced trader and a good teacher, advises Nikolai Solabuto.

“The institutes do not teach this profession, they teach it mainly in courses. Regarding how to choose a mentor, the question is open here. Basically, everyone is looking for a mentor who has achieved at least something in trading. But this is the wrong approach. I think that a person who has achieved everything in trading will not teach, he will trade. Accordingly, you need to look for a mentor who knows the teaching methodology, who teaches clearly, so that everyone understands everything. correctly assimilated by people. That is, the requirements are the same as in an ordinary educational institution, “Nikolai Solabuto explained.

Choose a broker. A trader cannot buy and sell financial instruments himself. This is the responsibility of the brokerage company, which, on your order, makes transactions. Orders can be given on their smartphones or computers.

Open a demo account. This is a practice account with virtual funds on it. You can train, make deals, try out your trading strategies, get acquainted with the trading terminal.

Open a trading account and start trading. It is necessary to follow the main rule of money management – the maximum risk in a transaction should not exceed two percent.

Some rules

Follow a trading strategy. You can’t guess and rush. Pick one strategy and don’t deviate from it. It should tell you where to open a trade and where to close it and why. When you come to the required level – close and it doesn’t matter if it is positive or negative. Discipline is more important here. And control over emotions.

Keep records. The main key to trading success is keeping records. A specialist should carefully record the results of his trades and settings of strategies in order to analyze them afterwards to identify the most successful.

Do not trade on the news. This kind of trading can generate huge profits. But at the moment the message appears, the market will not be in an adequate state, prices are jumping up or down, it is difficult to stay at the desired level. In addition, there are cases when, judging by the news, the market should open with growth, but it is falling rapidly. Why – no one knows. The main thing is technical analysis and cold calculation, says Nikolai Solabuto.

“News and fundamental analysis are like an undercurrent. Well, for example, fundamental analysis says that this company is bankrupt. Will a trader trade this security? No, of course, most likely it will not. Or, for example, the news says that strong movements in the market are expected today. Will a trader trade this security? Yes, it will, because strong movements mean increased volatility, increased profitability. Therefore, fundamental analysis and news are a kind of forerunner, everything else is just technical analysis. “

Do not borrow. All brokers, business coaches and mentors will unanimously say that on the exchange you risk losing all your money in the account. Fully. A technical glitch may occur, shocking news may come out and the markets may crash. You can also click the wrong button. It is not worth borrowing for trading – it is possible that there will be nothing to give back.

Be able to analyze data. Desirable quickly and correctly. There is a lot of mathematics in stock trading, which is presented in the form of charts, indicators and technical analysis patterns. So in addition to being able to study the materials, you need a knowledge base on the market in which you work.

Trading platforms

Stock market. They sell and buy securities there. First of all, stocks and bonds. The most liquid instrument is stocks. They can skyrocket in price tenfold in a short period of time. Fall, of course, too. Trading the stock market requires large sums of money. Shares are sold in lots of 10, 100, 1000 and so on. Leverage is not there, or it is small.

Foreign exchange market. Its other name is Forex. Currency is traded there. Moreover, traders in this market are constantly changing the currencies they are playing against. Fx brokers allow you to open real trading accounts with a one dollar deposit and master the exchange game from scratch.

Derivatives market. Here you can buy and sell futures contracts – futures and forwards. Someone refers them to the stock market, someone singles them out as an independent segment. You can buy anything you want – oil, copper, platinum, corn, sugar, tea, coffee, etc. It is worth remembering that this trade is extremely speculative. But do not be afraid that a wagon of corn or potatoes will be brought to your house if you do not sell these contracts on time!

Types of trading by trading time

High frequency. This is an algorithmic method of trading in financial markets, in which the execution of a huge number of transactions takes place in a matter of milliseconds. The incredible speed at which orders enter the markets is achieved with the help of very powerful computers using sophisticated algorithms. This type of trading requires advanced technologies, developers of high-frequency trading algorithms, but above all, large amounts of money. This is almost completely mechanized trading, says Evgeny Kogan:

“This is trading, when the computer basically works exclusively, it gives orders to buy, sell, sees an anomaly, very quickly enters and exits a position, earning not interest, but a fraction of interest. We do not practice this, but such a business really exists.”, – says Eugene.

Therefore, this type of trading tends to be popular with hedge funds and specialized investment funds, which, in turn, creates additional obstacles for individual traders to engage in high-frequency trading.

Scalping. Intraday speculative strategy, the meaning of which is to execute many trades in very short time intervals. Scalpers have to spend several hours a day at the monitor, looking for deals that can bring him a profit. To become a successful scalper, you need a lightning-fast reaction, perseverance and concentration, a lot of free time and, of course, strong nerves. Such a trader is guided by the choice of the most liquid instruments, for this he needs the most volatile pairs, which provide a great opportunity to open trades.

Day trading. Intraday strategy, which provides for the closure of all positions by the end of the day without carrying them overnight. It differs from scalping by orders of magnitude in the smaller number of transactions and their longer duration. This method is well suited for those who have free time to analyze and track transactions, but do not want to monitor open positions every minute. The latter need to be monitored periodically, as well as the release of economic statistics.

Swing trading is a type of trading style that stands between day trading and long term trading. The main advantage of the approach is an increase in the ratio of reward to risk. Swing is a large impulse move that can be caught and used.

“Swing trading is a form of trading, when they are looking for interesting moments to enter, interesting moments to enter the market, that is, operations are performed quite often. Sometimes it happens on the same day, sometimes the next day,” notes Evgeny Kogan.

Unlike day trading, swing trading takes less time. Therefore, the trader does not need to look at the monitor for the entire trading session.

Medium and long term trading. A strategy in which deals are opened for days, weeks, months and years. This type of trading requires tremendous patience and calmness. Time plays for the trader, this is an absolute plus: you do not need to study charts all the time and take into account local news.

Schedule and place of work

Based on the types of trading in terms of trading time, as well as taking into account the beginning and end of the work of certain platforms, the work schedule of professional trading can also seriously change. For example, an Fx trader’s working day is largely determined by the time frame in which he opens and closes positions, as well as the methods with which he works.

Due to the variety of trading styles, it is impossible to deduce a “typical” trader’s daily routine. If this happens at the workplace in an investment, brokerage, any other financial company, then the working day can be almost round the clock. First Asian markets open, then Russia, then the European market, followed by the American one. After its closure, there are several hours before the opening of the Asia-Pacific markets. And again in a circle.

However, if a trader works from home, then you can sketch out what his ordinary worker might look like, based on the preferences of certain markets and sites.

For example, for those targeting the world’s largest American market, remember that trade is tied to Eastern American Time (EST). The session starts at 9:30 local time (this is 16.30 Moscow time). A trader needs to prepare at least an hour in order to be fully prepared before the start of trading. A good specialist should:- go through your strategies or sketch out a short action plan for the day;- check the balance of your trading account in order to accurately assess the risks for each transaction, beginners are advised to risk 1-2% of the deposit amount;- “flipping” the economic calendar for loud news – this will help not to miss noticeable market movements;- make sure that the trading platform is working well.

Trading in the first hour after the official opening is very interesting for a Forex trader due to the high volatility of the market. Activity lasts until about noon (if you are guided by EST, it is 11: 00-11: 30 am). From around this time, volatility tends to decline as lunchtime begins.

As soon as traders presumably start coming back from lunch and meetings, the markets rise again and volume and price movement come to life. Traders are using this second wave for new earning opportunities before the markets finally close (4:00 pm EST). By this time, the trader has closed most of the open positions and canceled any unfilled orders. The movement of prices until the next day turns into a lull, and then it can follow new trends, play out completely different ideas.

Types of traders by behavior (be careful, there is professional humor!) Bears are engaged in the sale of assets, with the expectation to subsequently redeem the same asset at a lower price. The resulting difference is the profit of this group of traders. This tactic justifies itself in the face of a pronounced downtrend.

Bulls – earn on the rise in the exchange rate, contributing to this. The main technique is the purchase of assets, which are expected to rise in price, with the aim of their further resale on a speculative basis.

Whales are system traders who treat trading as a business. They are calm and cold-blooded, respect risks, make informed decisions about opening a position.

Sheep – act spontaneously and thoughtlessly, make deals on emotions and without justification. Sheep are all cheated, replenishing deposits at the expense of their losses, hence the analogy.

Chickens are overly cautious and cowardly traders. Lose money due to indecision, missing profitable entry points.

Pigs – this is how decisive and greedy traders are called. They tend to constantly take risks and make emotional trades in defiance of many rules, relying on large profits. From time to time they manage to make good money, but in most cases they leave with nothing. Pigs are ready to trade any more or less attractive position.

Donkeys – Unlike an Eastern proverb that never falls into the same ditch twice, a stock donkey falls into the same hole a thousand times. And every time he finds a new reason to justify himself. The donkey stubbornly averages the position, up to the unambiguous harbingers of the company’s bankruptcy. He always finds the reason for his defeat anywhere, but not in himself.

Peacocks – Sometime in 1999 a peacock earned 100% per quarter. Since then, he hasn’t raised the cache. Teaches beginners and has a pretty penny from it. There is no sense in the peacock in the market, except that it yells very loudly and successfully drives donkeys and pigs there to be slaughtered by bulls and bears.

How much does a trader earn?

This is by far the most popular question after people find out what a trader is actually doing. The difference between this profession is that earnings are not limited by anything. It is usually counted as a percentage. You can, say, have a small amount, but triple it every quarter. Let’s consider the main options for traders’ monthly earnings.

Negative yield. For all newbies, this is an almost inevitable scenario. All traders lose at the beginning of their journey. This is usually due to psychology and loss aversion. Gam-bling people cannot beco-me professional traders. Trading is not a casino, Yevgeny Kogan warns.

“Many people understand trading as normal work in the stock market, but still, it seems to me, there is a substitution of concepts. Casino and the stock market. People turn their work into a kind of casino., okay, I sold it, “says Eugene.

The yield is 2-5%. Calm, measured trading without unnecessary risks. This is how most experienced traders work, who already enjoy it. Their deposit is, conditionally, 100 thousand dollars, and therefore the monthly income will be noticeable.

The yield is 10-15%. This is how low-risk traders, or those who strive to achieve certain indicators, make money. At the same time, the mark of 10% per month attracts a lot of players. It is more important for a trader to find a full-fledged idea, or better a whole underestimated sector that can take off.

“It’s always nice to make money, I won’t dissemble. When, for example, you bought a share, and in a week or three days it grows by 20-30% and you sold it, yes, that happens. And it is not so rare. But this rather as an exception. And the rule is to find an interesting sector, to find an underestimated idea, especially the market is imperfect, there are always points of underestimation. And you calmly work with an eye to what will not be today, but maybe in six months, or maybe in a month, and maybe tomorrow, “notes Evgeny Kogan.

The yield is 50-500%. Such people also occur. These are either the lucky ones or the professionals of the highest category. To achieve such heights, many years of successful work are needed. Traders who earn millions of rubles do not work for anyone.

The most famous traders in history

Warren Buffett. A legendary investor who invested in promising companies and held them for many years. He began by personally managing the funds of relatives, Buffett reached the top of the list of the richest people in the world. His fortune is over $ 100 billion.

George Soros. No less famous figure. He passed the way from the very bottom, now he has almost retired, he only manages the capital of the family. In 1992, he earned 1 billion dollars a day on the fall of the pound against the German mark.

Larry Williams. He holds the record for the annual income when trading in the derivatives market – 11,000%. He was able to increase his starting capital 100 times. He is engaged in training analysts, conducts seminars.

Disadvantages of the profession

Your activity will cause great confusion among your relatives and friends. Indeed, you do not go to work like all normal people, but sit all day at the computer. You will need to go through a long period of study without a guarantee of a positive result. Successful trading on the stock exchange will require tough self-discipline from you and therefore is not suitable for everyone. And you will constantly experience strong emotions and stress, warns Yevgeny Kogan.

“I do not really recommend trading for the majority of those who turn to me. Firstly, it is an incredibly nervous activity. Secondly, very often people turn into abnormal, because they sit for days at computers, do not eat, do not drink, grow beards This is a very difficult type of business. And most importantly, I would not jump, which is especially grateful. Therefore, we are in favor of quiet investments when you do not go crazy, when you don’t care what happens to paper within the next fifteen minutes or the next few days, “- advises Yevgeny Kogan.

Profession benefits

This type of business can be done at any age: it does not require great physical strength. You can use almost any capital, enter even with minimal investment. You only need to pay 13% income tax. Complete freedom from officials, bosses, employees is guaranteed. Trading is not tied to a specific location. You can live and trade wherever you want, even at home, even on the ocean shore.

Perspectives

The development of artificial intelligence (AI) will completely eliminate a person from trading. The computer is capable of efficiently executing hundreds of thousands of transactions. To make a decision to buy and sell, a split second is enough for him. Traders have been using special robotic programs for many years. They instantly identify trends, analyze quotes on several exchanges and issue a mathematical forecast model. Both now and in the future, of course, the profession of a trader will be subject to automation. The man succumbed to the machine that makes money for him.

But in the pursuit of profit, you should be careful, because on the Internet there have been more and more announcements of the sale of AI-based trading robots lately. Developers and implementers practically guarantee the target audience a yield of up to 300% monthly. Such ads are posted by scammers. Paid trading robots do exist. They are sold through specialized online stores. The potential profitability of these programs is 10-12% per month.

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