In the world of investment or investment, like investors, the term trader is perhaps not foreign to sound.
Those who buy and sell investment instruments are called traders in the investment world.
Literacy about traders is very important for developing abilities so that buying and selling activities can run smoothly and according to purpose.
Therefore, to learn more about the role of traders in the world of trading, let’s peel it deeper so that you understand better.
What are Traders?
Traders are people or parties who buy & sell investment instruments at a certain time.
Usually, this buying and selling activity is carried out in a short period, for example, a matter of days to minutes, to get a large profit.
On this basis, traders focus more on fluctuating price movements from market situations.
In this regard, traders usually buy at the ‘lowest price, then sell at the ‘highest price,’ an analogy of buying at a low price, then selling at a high price.
Not only that, traders also play an important role in boosting market price movements & the economy in general through trading activities and creating market liquidity.
Main Differences Investors and Traders
Knowing & understanding the difference between trading & investment is important to help investors & traders choose their role in the investment world.
It doesn’t stop there; it also has a visionary purpose, for example, how the performance, tactics, and strategies are taken.
Next, let’s discuss the differences between investors and traders that you need to understand.
1. Understanding of Roles and Purpose
The first major difference between investors and traders is understanding their roles and goals.
If investors buy instruments by considering the fundamentals, traders will buy by looking at market conditions and sentiments.
2. Timeframe Approach
If a trader chooses a short timeframe (for example, a matter of days-minutes), an investor chooses a long timeframe (even up to a matter of decades).
3. Define Strategy
Investors generally choose strategies with analysis, a combination of fundamental and technical, in contrast to traders who choose profit targets & stop losses.
4. Trading Frequency and Intensity
Position traders have more intensity or buy-sell activity than investors because traders are very concerned with rising or falling prices.
If investors have low trading frequency and intensity, traders have high trading frequency and intensity.
5. Focus on Revenue and Capital Gain
The focus on income and capital gains is another major difference between investors and traders.
If the investor’s focus on income and capital gains is low, then the focus on income and capital gains from the trader’s side will usually be higher.
Types of Traders
It is very important to know the types of traders before jumping into the investment world.
Because an understanding of the types of traders is in direct contact with methods, strategies, and risk mitigation that will be faced.
In the future, let’s discuss more deeply the various types of traders that must be known:
1. Day Traders
Opening and closing positions within a day. The first type of trader is a day trader or daily trader.
In this type, the analysis of assets is carried out using a 24-hour time frame.
Daily traders will generally enter and exit transactions on the same day.
2. Swing Traders
The second type is swing traders. Unlike day traders, swing traders hold positions for several days to weeks.
It aims to find opportunities for medium-term price movements, so this type of trader doesn’t need to look at trading charts all the time.
You must know scalping trading is used in various financial markets such as the stock market and currency market (forex), to forex.
The focus of scalping trading is to seek profit by taking advantage of price movements in a short time (a matter of seconds to minutes).
4. Position Traders
The next type of trader is a position trader. This trader aims to invest for a longer timeframe.
This aims to obtain the maximum profit that will be obtained from relatively large price changes.
The goal is to find the maximum profit potential to be achieved from large changes in price.
5. Algo Trader
As the name suggests, algo traders will use algorithms for automated trading.
With a mathematical algorithm, this trader can place various investment instruments through a computer program.
How to Become a Successful Trader for Beginners
Who are those who don’t want to be successful, profit a lot, and get rich because of the world of trading?
Becoming a trader takes work, and many challenges must be overcome.
As we know, a trader must have sharp analytical skills to mitigate the risk of loss in trading.
The followings are some tips or ways to become a novice trader, including:
1. Have basic knowledge of the world of trading
The main thing is that traders must have basic knowledge or knowledge about trading, and other investment instruments, both from low-high risk.
2. Choose the right type of trading
The next step is to choose the right type of trading. This is related to the capital owned, risk profile, and others.
By considering this, beginners can later calculate the profit to be generated and other related matters.
3. Choose the right application
It’s like making a dish; of course, you need a frying pan to cook it; it’s the same as getting into the world of trading; of course, you need an application platform to carry out commodity buying and selling activities.
For example, using the best crypto trading applications such as INDODAX to maximize cryptocurrency trading activities.
Choosing the right application is usually related to the legality and capabilities of the application provider company.
4. Don’t start with a large amount right away
Little by little, over time, it becomes a hill; I’m sure you’ve heard of it, right?
Start trading with sufficient capital, according to ability & have predicted the loss and profit limits that will be obtained.
5. Think realistically
Next, successful traders will always think realistically. That is, traders do not need to have high expectations of trading results later.
Thus, if there is a failure at one time, then there is no great disappointment or regret.
6. Have a good trading strategy
A precise & good trading strategy must be planted for a trader.
This trading strategy is important for traders to determine when to enter and exit the investment market (market).
7. Discipline and consistency, as well as good emotions
The following way to become a successful trader, namely with discipline and consistency, and good emotions.
The reason is with the things above, traders will usually succeed because the trading strategy set before doesn’t work.
Advantages and Disadvantages of Being a Trader
As with various other professions, choosing to be a trader also has advantages and disadvantages.
The following are some of the benefits and disadvantages that need to be known, including:
- Potential for Huge Financial Profits
The first is significant financial asset profit opportunities from buying and selling assets and commodities on the market.
Remember, this profit can only be achieved by traders applying precise tactics and strategies to carry out trading activities.
- Time and Location Flexibility
The next benefit is flexibility in time and location. Being a trader does not have to come to the office and can take place from anywhere.
Even trading activities are now much easier because they can be done anywhere & anytime because of technological developments and the progress of the times.
- Can Develop Trading Fundamental & Analysis Skills
Choosing to become a trader indirectly trains our habits to be skilled at analyzing & predicting asset & commodity price movements in the market.
- Accustomed to Making Decisions Without Pressure
The next benefit is getting used to being an independent and free person when making decisions.
While trading is a buying and selling activity where decisions are taken based on personal considerations according to the trader’s analysis & ability to take a buy or sell position.
Potential to Create Passive Income
Trading can also be used as passive income, which can be used as additional income besides income from the main daily job.
- High Financial Risk
Although the potential for financial gain is large, the financial risk is also high, which is one disadvantage of being a trader.
- Market Uncertainty and Fluctuations
Uncertainty and market fluctuations will affect the results obtained by traders.
- High Emotional Pressure and Stress
Becoming a trader demands full concentration to avoid big losses.
It’s no wonder that one of the downsides of being a trader is feeling a great deal of emotional stress and stress.
- It is Time-consuming & Requires a Sense of Discipline
Who said being a trader must have a lot of time to relax? It takes a long time to carry out trading activities as a trader.
Also, traders need a firm attitude and discipline to avoid falling into FOMO or certain temptations when buying investment assets according to their needs.
- Possibility of Significant Loss in Trading
Losses in trading are likely to occur if traders make the wrong decisions in trading activities of buying and selling assets or commodities.
This can happen if the trader fails to execute the Strategy correctly because of other things.
In conclusion, traders carry out buying and selling transactions of investment instruments.
The trader’s role is, among other things, to create market liquidity, execute trades, and take risks to make profits.
On the other hand, it is important to weigh the advantages and disadvantages of being a trader.
By highlighting this, a person can choose to enter the investment world as a trader or investor.
It is also worth remembering that anyone must exercise careful judgment before engaging in trading.
One way to do this is to gather more information regarding traders and trading activities.
At INDODAX Academy, for example, you will get a lot of information about becoming a trader, especially a crypto trader.
Come on, start learning crypto trading right now only at INDODAX Academy.