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Main Dictionary T

Trader

Trader — a professional who buys and sells financial assets. Traders can do this for a company or trade individually. In contrast to investment, trading implies the carrying out of transactions during a short time. It can be a few minutes or a few days.

Trading requires an understanding of the financial markets, knowledge of trading strategies, and work of trading indicators. However, this occupation doesn’t require a specific degree. It requires knowledge and practice. 

All traders pay capital gains taxes (short-term or long-term). A capital gain tax is an analog of income tax. Capital gains are recognized when assets are sold for a higher price than was paid when they were purchased or when they generate some form of additional value, such as interest or dividends. Capital gains tax is levied only on the difference between current and initial value. 

Work of Trader

To start work the trader needs to find an electronic trading platform. These platforms are provided by brokers. To select a good platform it is necessary to learn the opinions of other traders and the rating of the site. Then, the trader opens a demo account to test the work of the platform and the trading indicators. If everything works, they can open a real account and place the money upon the deposit.

A trader starts the work when the exchanges are opened. During the day they sell and buy different assets. To do so, they select the most profitable assets, follow the market news and apply different trading strategies. The gained money comes to the trader’s account. Traders can withdraw and cash out the funds. 

A trading strategy is a crucial thing for the trader. Strategy is a circumspect consequence of actions that leads to a win. The strategy makes the work of a trader more well-thought-out and logical. There are numerous trading strategies, but there is no ideal one. Each strategy can work under certain circumstances. That’s why a trader should test every strategy on the demo account. Also, it is better to know many trading tactics for different situations.

Another important thing is the ability to work with different indicators. A trading indicator is a mathematical calculation embodied in the line on the trading chart. This line can help the trader to identify the most profitable signals and understand the market situation. There are numerous trading indicators and each one behaves a certain way. For proper trading, it is recommended to apply two trading indicators. 

Types of trading:

  • Scalping — opening of many trades for a small amount of money.
  • Swing trading — receiving a profit from trades within several days. 
  • Day trading — trading within one working day.
  • Momentum trading — trading according to the movement of the trend.
  • Position trading — trading within several months. 

Trader and Broker

A broker is an intermediary that sells and buys assets on behalf of a trader. They receive a commission for the services. It can be either an individual or a company. As for trading, the broker is a firm that provides the trading terminal on its site. On the broker’s platform traders can find a trading chart, indicators, market news, and rates of exchanges. Some brokers offer trading robots that open the deals according to the predetermined algorithm. 

Before working with a broker, a trader should check these important things:

  • Availability in your country. The well-known brokers with a good reputation are available in most countries of the world. 
  • Ways to withdraw the money. Good brokers work with different electronic platforms. However, traders should utilize global services like PayPal or Skrill because they are available on the majority of platforms.
  • Reputation. The trader should read the comments of other users who had worked with a certain broker before. The huge number of negative comments is a red flag. Also, it is necessary to check the ratings of trading platforms.
  • Commission. Check the amount of the broker's commission, it should be reasonable.
  • Account minimum. While opening the real account, a trader needs to deposit a certain amount of money for work. Usually, the amount of deposit isn’t too big. 

Qualities of a Good Trader

To be successful and receive a profit, the trader should have several important qualities. First, they should practice constantly and try different strategies. It is necessary because the market is unpredictable, and the sole strategy can’t work all the time. Also, traders should understand the work of different indicators.  

As for psychology, the main qualities of a trader are patience and the ability to control their emotions. Traders should act with a cold head, follow the strategy or quickly change it, if necessary. The negative emotions can make the trader’s action more chaotic and lead to the loss of money. 

The trader should learn money management. Knowing money management allows them to select the most profitable assets and diversify the risks. Plus, money management helps to identify the moment when it is better to stop trading and leave the market.  

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