In the movies, traders are still pictured on the floor of the stock exchanges, calling out bets every minute. Now trading looks different. We figured out how traders work and what it takes to become one.
Working with money brings money – it would seem a logical conclusion. That is why the profession of a trader looks so attractive. Moreover, thanks to modern tools, financial and stock market specialists can start trading with small amounts, gradually increasing their expertise and choosing a trading strategy that suits them.
What is trading
Trading is the trading of currencies, securities, or commodities for profit. In the financial and stock markets, traders are distinguished – official participants in trading, who, on their own behalf or on behalf of clients, buy or sell assets based on speculative gain. They have a special license that allows you to trade directly through the exchange. Private traders need an intermediary for this.
As a rule, traders use two main methods for trading. The first is buying an asset at a low price and selling it at a higher price. This difference results in a profit. The second method is more complicated – this is the conclusion of a contract for the sale of an asset at the current, high price with delivery later. In this case, the trader buys the asset when the price of it falls, and transfers it as agreed, having received a higher price for it in advance.
Stock trading is certainly not a modern invention. The buying and selling of goods has been practiced since ancient times, when money was first introduced into circulation. At the same time, traders appeared who could be called resellers. However, officially such a profession began to exist with the opening of stock and financial exchanges. In Russia, such platforms appeared in the 18th century by decree of Peter I, and every year the number of exchanges only grew. By the beginning of the 20th century there were more than a hundred of them. During the Soviet period, the activities of the exchanges ceased. Moreover, currency speculation was punishable by law, so traders went underground and the profession ceased to exist. Only in the 1990s, with the opening of the market, did exchanges return.
If in the past St. Petersburg could be called the center of exchange trading in Russia, then in the 20th century trading began in Moscow. Here, in 1991, exchanges began to open, and so quickly that in just one year about 80 of them were formed. The specialization of these sites was different – from raw materials to privatization assets. In 1992, the Moscow Interbank Currency Exchange (MICEX) was founded, which became the center of trading. And three years later, the RTS stock exchange appeared. With the development of technology, the access of a private investor to the sites has become easier. Now almost any person who has sufficient starting capital and a desire to trade can become a trader.
What is the difference between a trader and an investor
Several people can participate in stock trading and their roles should not be confused:
- a trader is someone who buys and sells assets, places orders, closes positions and thinks over short-term strategies for playing on the stock exchanges. He can do this for himself or a client. In addition, traders trade frequently, and the essence of their work is to speculate in securities
- a broker is a necessary participant in the stock and financial market, he is a link between the directly official platform (exchange) and a trader or investor;
An investor is a person who can buy and sell assets on his own or contact a trader for this. Its important difference is in the purposes and terms of financial investments. The investor is focused on high profits in the long term.
Thus, although the roles of a trader and an investor are similar, their tasks are different and the tools may also differ. A trader trades for profit in the short-term speculation of assets, and an investor can purchase an asset and receive dividends or coupons for several more years before further resale.